Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Orders of the Day — IRON AND STEEL (RESTRICTIVE TRADING AGREEMENTS)

11.4 a.m.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson): I beg to move,
That the Iron and Steel (Restrictive Trading Agreements) Order, 1968, a draft of which was laid before this House on 20th May, be approved.
This Order is made under Section 33 of the Iron and Steel Act, 1967, which provides for my right hon. Friend to repeal Section 7(1) of the Restrictive Trade Practices Act, 1956, when central arrangements have been made to import raw materials or other iron and steel products for use by the British Steel Corporation. Section 7(1) of the Restrictive Trade Practices Act exempts from registration agreements between iron and steel producers for central importing and distribution of raw materials and other iron and steel products. Subsequent amendments to the subsection have made exemption dependent on the Minister of Power's approval.
Two agreements have been approved under Section 7(1). Under the first, all steel companies using imported iron and manganese agreed to get their supplies from B.I.S.C. (Ore) Ltd., a subsidiary of the British Iron and Steel Federation. Under the second, steel companies using imported magnesite and magnesite bricks agreed to get their supplies from the British Magnesite Corporation Ltd., another subsidiary of the Federation. The Federation has now however been wound up and B.I.S.C. (Ore) and British Magnesite have become subsidiaries of the Corporation. The conditions set out in Section 33 of the Iron and Steel Act

have therefore been satisfied and the Order can now be made.

11.6 a.m.

Mr. John H. Osborn: As the Parliamentary Secretary knows, I am interested in the private sector of the steel industry, but I wish to comment on this Order as a Parliamentarian. In Committee on the Bill we did not debate the Clause. I do not know whether the Parliamentary Secretary recollects that it was 11.27 p.m. when we withdrew and the Clause went through on the nod.

Mr. Speaker: We cannot debate the Section from which this Order springs. We can only debate the Order.

Mr. Osborn: Thank you, Mr. Speaker, I was moving straight on to say that we are now dealing with an Order which results from the Clause which was not debated. As the Parliamentary Secretary has outlined, the old arrangement was that the British Iron and Steel Federation, the B.I.S.C. (Ore) Ltd., and the British Magnesite Corporation Ltd., were affected by the 1956 Restrictive Trade Practices Act.
This Order has been put to the industry, which has welcomed it. It is a natural development from the original Bill, but there are a number of questions which should be asked. I understand that the private sector will still have the option of purchasing its iron ore and will have rights to purchase by agreement from other suppliers if at any time it is dissatisfied with the arrangements made with B.I.S.C. (Ore) Ltd., which becomes the purchasing department of the British Iron and Steel Corporation. What guarantee have we that the B.I.S.C. as a purchaser will not have preferential terms over those of the private sector?
This was an excellent arrangement which is about to be continued. Will there be fair treatment, as between the public and private sectors? It would be encouraging if the Parliamentary Secretary could confirm this. I recognise that today a good understanding has been built up in this field between the public and private sectors. The bulk of iron ore will be used by the public sector. Therefore, in the normal course of making commercial arrangements, it could be claimed that the public sector will be


purchasing in large scale or bulk quantities, and therefore will be eligible for special discounts. If this claim were pursued it would put the private importer in a difficult position.
Under the old arrangement both public and private companies purchased their ferro alloys through the normal traders and metal merchants. I presume that this Order is strictly confined to terms of reference which in no way influence the purchase of ferro alloys, or could it be extended to them? Has the Parliamentary Secretary any knowledge of the extent to which scrap will be affected by this Order? Very little scrap has been imported of late, but presumably if the private sector wanted to purchase imported scrap, this arrangement could be extended.
The Parliamentary Secretary may not be able to give me these assurances now, although they will be welcome if he can give them, and a letter subsequently explaining the position will be satisfactory.

11.12 a.m.

Mr. Michael Shaw: The origins of the Order lie in the Iron and Steel Act, 1967. The Minister joined us halfway through the proceedings on that Bill, in the less hectic stages. No doubt he has mixed feelings about that.
During the debate, we were naturally concerned, and properly gave voice to our concern, that Clause 29, now Section 13 of the Act, should not be used to put the private sector of the industry in any way at a disadvantage. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkins) described the Clause as an "I'm all right, Jack, Clause". That was couched in the rather provocative terms of those Committee proceedings and the Parliamentary Secretary's predecessor said that perhaps my hon. Friend had exaggerated the problem. All that my hon. Friend was trying to do was to highlight the fact that a problem exists.
The British Steel Corporation, having ensured that supplies of imported steel and manganese ore are readily available, through the acquisition of B.I.S.C. (Ore) Limited and that the supplies of imported magnesite are equally secure through the acquisition of the British Magnesite Corporation, the Minister, as he has

every right to do, is abolishing the privilege which previously existed under the 1956 Act whereby the industry was allowed, without registering them, exclusive agreements for the purchase of certain raw materials.
My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) has a great knowledge of the iron and steel industry which is always respected in the House. He asked whether possible purchase arrangements for future imported materials, other than these materials, are affected. The answer is "No", because only two agreements have been concluded in this respect. The Parliamentary Secretary said that any such agreement in future will have to be registered.
Our concern, as in the debates on the Bill, is to make sure that the Order in no way places independent steel producers in a difficulty. I have made such inquiries as I can and I believe that the Order does not place the independent steel producers in any difficulty—or, at any rate, that it is not expected to do so. It seems to me that, following the arguments which we put forward in Committee, the British Steel Corporation are prepared to offer, and have already offered, a continuing service by offering to enter into individual arrangements with any independent producer who may want to use B.S.C. services. The advantage to the independent producer, if he accepts the new arrangement, will be that he is not bound to go to the B.S.C. or one of their subsidiaries as a source of supply. If he sees a better opportunity, either of service or of price, it will be possible for him to make his own independent arrangements.
I have a question to ask the Parliamentary Secretary, although I think that the answer is "No". Does he agree that it is not likely that any independent producer would wish to continue the existing agreements? If they were continued, would it have to be by the agreement of all the independent producers or could one independent producer alone continue an exclusive agreement? If that were possible, it would have to be registered in accordance with the 1956 Act.
In considering the question of fairness, I remind hon. Members of the words of the Parliamentary Secretary's predecessor in Committee. As reported in column



2293 of the OFFICIAL REPORT, in anticipating the sort of agreement likely to arise between the B.S.C. and independent producers, he said,
These arrangements will not be registrable "—
That is because they are not exclusive—
and no agreement will be necessary between private firms and the Corporation, remembering that the Corporation, as an agency, will take the overwhelming bulk of imports anyway. It is in that respect that there will be benefits arising from economies of scale."— [OFFICIAL REPORT, Standing Committee D, 13th December, c. 2293.]
I can see that there will be these economies, but I believe that my hon. Friend the Member for Hallam is right to pinpoint one of the dangers. The B.S.C. already have a very commanding position, because they will take by far the greatest quantity of the raw materials being imported. A conflict of interests may well arise in future about supplies, price or quality. It is right that we should bring that out to make sure that if any such conflict arises, the B.S.C. will never use their overwhelmingly strong position unfairly against independent producers. As far as I have been able to discover, B.S.C. are anxious that they should not use these powers unfairly. I understand that B.S.C. are fully aware of their position and are anxious to provide a fair service to those independent producers who want to avail themselves of the service. It is on that understanding that we accept the Order.

11.18 a.m.

Mr. Freeson: May I have the leave of the House to reply both to the general points which have been made and, as far as I can, to some of the specific points made?
I was asked about the relationship of the small private sector to the B.S.C. and to fair trading practices. As the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) rightly said, there is an anxiety to bring about fair practices on both sides—an anxiety felt by both the B.S.C. and the private sector. Adequate machinery is written into the Act which the private sector can use

should they feel justified in complaining of unfair trading practices in pricing. The Order was, however, discussed both with the B.S.C. and with the British Independent Producers Association, and both were quite happy about it. Generally speaking, the hon. Member has the position correct.
I was asked whether the private sector would have to register an agreement if they wanted to buy from a supplier other than the B.S.C. I understand that they would not, unless the private producers had an agreement to buy only from that supplier. A straight commercial transaction would not be registrable under this procedure.
As for the private sector, under the Restrictive Trade Practices Act agreements solely between inter-related bodies —that is, between corporate bodies and their subsidiaries—are not registrable. Arrangements confined to the Corporation and the publicly-owned companies are not therefore registrable and would not be affected by the Order.
The private sector interest is very small. Less than one per cent, of the ore and only between 15 per cent, and 18 per cent, of the magnesite and bricks containing magnesite, imported last year by B.I.S.C. and British Magnesite, went to private companies, but the B.I.S.C. has offered all these companies the use of its central purchasing facilities at terms comparable with those for public sector companies, so the relationship is quite happy and there are no grounds for uneasiness on that score.
The only other question asked by the hon. Member was whether this division could apply to ferro-alloys and scrap. These are not affected by the order in any way.
If there are any other outstanding points which hon. Members wish to raise when they read the OFFICIAL REPORT we shall be glad to answer them.

Question put and agreed to.

Resolved,
That the Iron and Steel (Restrictive Trading Agreements) Order, 1968, a draft of which was laid before this House on 20th May, be approved.

Orders of the Day — RATE REBATES

Mr. Speaker: It has been suggested to me that we might take the two rate rebates Orders at the same time. They do similar things respectively for England and Scotland. Unless there is any disagreement the first Order will be moved, and we shall discuss both.

11.22 a.m.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. Arthur Skeffington): I beg to move,
That the Rate Rebates (Limits of Income) Order 1968, a draft of which was laid before this House on 29th May, be approved.
I am grateful to you, Mr. Speaker, for your suggestion. These Orders will probably be generally welcomed because the objective of each is the maintenance of the benefits of the existing rebate scheme. They were foreshadowed by my right hon. Friend the Prime Minister in a speech last January. The rating authorities have been informed—there have been the usual contacts—and there have been no objections. The purpose behind both Orders has been generally welcomed.
I should point out that I am referring to the Order affecting England and Wales; my hon. Friend from the Scottish Office will be glad to answer any Scottish points that may arise. The Explanatory Notes to the Orders set out their purpose very well, but perhaps I ought to sketch in the general background to them in order that their effect can be fully understood.
It is widely agreed that there is a good deal that we would like to see altered in terms of local government finance. We should all like to see it put on a better basis. We have taken the view that this can best be done when we have been able to settle, as a result of the work of the Royal Commission and its recommendations and the proposals—which the Government will then bring forward— the future organisation of local government. Meanwhile, we ought to do what we can to make the existing system more tolerable, especially to those householders who are less well off.
A series of Measures have been passed which, when he was Minister of Housing,

my right hon. Friend the Lord President of the Council referred to as patching-up operations. These have brought considerable relief—

Mr. Speaker: Order. We cannot discuss the Royal Commission on Local Government and all the other Measures. This Order modifies a rate rebate system. It is the modification that we are discussing.

Mr. Skeffington: I fully understand that, Mr. Speaker. I was merely referring to the fact that at this stage we cannot make a total recasting of the system, but that we have passed a series of Measures—of which this Order will be one— which, in the meantime, we hope will assist those householders who would otherwise have to face a fairly heavy rate bill.
As a result, the restraint generally exercised on local authorities in connection with other measures, the earmarking of part of the Rate Support Grant for the special benefit of householders, and the substantial help now given by the provision for the payment of household rates by instalments, have meant that the impact of the general increase in rates on this category of ratepayers in the last two years has been minimal.
Over 1 million low-income householders in Great Britain in 1966–67 and nearly the same number in the year under review have been receiving rate rebates—averaging £15 a year—as a result of previous arrangements, thus cutting their rate bills roughly by half. That is in addition to the total of more than two million householders who are getting the whole of their rate bills reimbursed by way of a rates allowance in their supplementary benefit.
But the income limits governing the rate rebate entitlement were fixed more than two years ago and income levels in general have risen since then— through increases in the levels of social security benefit, the increase in old age pension last year and the more recent increase in family allowances. If the adjustments were not made as proposed in the Order we might be exposing once again some of the poorest members of the community to the full impact of household rating—the Government do not intend this to happen.
Accordingly, by the Orders the income limit for single househouders is being raised from £8 to £9 a week and for married couples from £10 to £11 a week, and the extension per child is being raised from 30s. to £2 a week.
These new income limits will operate in relation to rebates payable from this autumn's rebate period onwards—from October in England and Wales and from November or December in Scotland. As entitlement to rebate for each half-year rebate period is governed by the income received during the previous period of six months—in England and Wales this previous period is the preceding calendar half year and in Scotland it starts rather later—this means that all income received from last January onwards in England and Wales and from last April onwards in Scotland will be assessed by reference to the new limits and not the old. Thus, if the Orders are approved, the recent increases in pensions and family allowances, to which I have already referred, will not be offset, even in marginal cases, by any loss in rebate entitlement.
In any event these income limits do not entirely cut off any entitlement to rebate. They are merely the limits beyond which the maximum rebate has to be tapered down by five shillings for every £1 of extra income. The maximum rate for a half-year period is two-thirds of the amount by which the reckonable rates for the period—that is, the rate bill adjusted where necessary for the presence within a household of other income-receiving adults—exceeds £3 15s. This means that usually, and especially where the rates are sizeable, a householder can still get some rebate even when his weekly income is £1 or so above the limits which have been laid down.
I will give a few examples. With the new limits in operation from this autumn onwards a retired single person will be able to get the maximum rebate with an income not exceeding £9 a week, and probably will get some rebate even with an income of up to £10 a week. A married couple without children can get the maximum rebate with an income of up to £11 a week, and probably will get some rebate even if their income is £1 or so above this figure. A couple

with two children will get the maximum rebate with an income of up to £15 a week, and some rebate even if the income goes to £16. A couple with four children will get the maximum rebate with an income of £19 a week, and probably some rebate even if the weekly income were £20, and so on. To give an even more concrete example, a couple with four children on an income of £19 a week and a rate bill, or a rate element in their rent, of £25 for the half year, would be able to get a rebate of about £14, and if their weekly income is £20 they will still get a rebate of about £7 10s.

Mr. David Winnick: Can my hon. Friend tell the House if there is any intention to publicise the scheme more adequately in the Press and, particularly, on television? Many people who seem to be entitled to rate relief are not claiming it, and many council tenants are not aware that they are as entitled to claim relief as owner-occupiers.

Mr. Skeffington: There have been schemes of publicity. One reason why it is necessary to have the Orders early is that application may be made in August, although the dates that I have given are those when the rebates become operative. During this interim period we and other authorities will want to secure the maximum publicity.
I will say a word or two about the take-up of the rebate scheme. Although we have calculated that if everybody who is entitled made a claim there would be something like 1,500,000 persons, even with the publicity and all such activities, in which I hope the hon. Members will play a part with their constituents, it is unlikely that more than one million applicants will apply. This is disappointing, but I am sure all hon. Members will draws the provisions of these Orders to the attention of their constituents.

Mr. Winnick: Will television also be used?

Mr. Skeffington: All these methods have been considered, and one has to use all the methods at one's disposal, bearing in mind that such operations involve extra cost to the taxpayer.
I have given examples which show the very considerable benefit to those with


small incomes, and, particularly, with small incomes and large families.
I will deal with one other point that often arise on this procedure and may well arise with the new limits. The new income limits, like the old ones, relate to the gross income of the householder or the couple, not including the income of any other person in the household, since the presence of the other person is, instead, taken into account by way of an adjustment in the reckonable rates on which the rebate is calculated. The gross income includes pensions and family allowances and, indeed, income of any kind, and one reason why the income limits are being increased is to take account of the increases in income which have taken place. It has been argued that certain types of income should be disregarded. There has been a campaign that war disability pensions, for example, should be exempted. One has considerable sympathy with this point of view, but there are many good reason why the Government have felt that it is right not to make this kind of exception.
The rebates are in the nature of a tax relief for all householders of small means and are made regardless of how these means are derived or on what they are spent. I should be going beyond the purport of the Orders if I went into all the reasons why this has been so. If particular types of income were to be excluded, instead of the rather simple procedure we now have, the manpower required to operate the scheme would have to be increased enormously. The scheme has to be operated by the local authorities, and it already imposes a considerable burden upon them. It might well mean that there would have to be an inquisition into household income of a nature which would be repugnant to many people. It would certainly mean that the authorities would be asked to operate a far more complex scheme than this temporary scheme which will operate until we can revise and re-arrange local government finance generally. It would be difficult to distinguish war pension cases, and one can honestly say that someone who has been suffering for years and receiving a disability pension on account of an industrial complaint, possibly contracted during service in the mines—

Mr. Speaker: I hope the hon. Member will not pursue in detail Amendments to the Order, which cannot be made.

Mr. Skeffington: Mr. Speaker, as this has been a subject of very considerable correspondence with my Department and has been raised throughout the country in connection with the Order, I thought that the House would like to know the reasons why the Government do not propose in the Order to alter the basic scheme, which has the merits of simplicity and certainty. For the reasons which I have given, it would be very difficult to produce another scheme which would give this degree of certainty and would be practical for the local authorities.
The increases on the incomes contained in the Order have been selected broadly to reflect what the resources, both national and local, can afford. The Exchequer bears 75 per cent, of the increase and the other 25 per cent, has to be found locally. It is calculated that the increases in the Order will take care of the additional total benefits and the rise in smaller incomes which have taken place since the last limits were introduced. The numbers of those who will be able to get relief will be brought back to what they were originally when the scheme was introduced.
In financial terms, bearing in mind that the Orders take effect half-way through this year, if everybody who was entitled to relief claimed, it would be theoretically possible for the total payment of rebates in Great Britain during the year 1968-69 to be about £22,500,000, instead of the present £18 million. With the Exchequer meeting 75 per cent, of the cost of the rebates, this means a theoretical Exchequer liability for 1968–69 of about £16·75 million, instead of the present £13·5 million. In view of what I have said about the take-up, although we shall do all we can to publicise the scheme, the Exchequer liability in 1968–69 is likely to be well below the £16·75 million, and provision has already been made for that in the Estimates.
On the timing of the alterations, the Orders affect rebates payable from this October in England and Wales and from November and December in Scotland. But, as I said in answer to my hon. Friend the Member for Croydon, South


(Mr. Winnick), applications for rebate can be made as early as 1st August in England and 16th September in Scotland. This is why the Orders are made to come into operation ahead of the rebate periods. If they are approved in both Houses this month, we shall arrange for the necessary publicity to start next month and to continue.
I commend the draft Orders to the House. As long as the rating system remains with us in its present form, the Government must protect the least well off householders against its regressive impact which has been, unfortunately, one of the characteristics of rates. The supplementary benefit machinery now gives full reimbursement of rates to over 2 million of the poorest householders. This rebate scheme, if the Orders are approved, will give very substantial relief to a further 1 million or more householders.

Mr. Speaker: May I remind the House that we are discussing the raising of the income limits which govern rate rebates. That is what we must debate.

Mr. Michael English: On a point of order. Will you, Mr. Speaker, allow Members to stay within the limits of the Minister's speech as distinct from the limits of the Orders?

Mr. Speaker: This is always a difficulty. I shall afford the same tolerance to hon. Members as I afforded to the Minister—and that was not very much.

11.41 a.m.

Mr. Graham Page: I agree entirely with the Joint Parliamentary Secretary that we ought to make the rating system more tolerable for ratepayers of modest means. But I think that it was very naive of him to imply that these Orders are necessary because income levels in general have risen since householders' money incomes have risen. These Orders are necessary, because, in two and half years of Socialist Government—

Mr. R. F. H. Dobson: Oh.

Mr. Page: The hon. Gentleman might wait until I have finished the sentence before groaning. I will repeat it. These Orders are necessary because, in two and

a half years of Socialist Government— that is, since the rate rebate scheme was proposed—two very relevant things have happened. First, the cost of living has increased and, therefore, the value of money has dropped by 1s. in the £; and, secondly, the rates payable by the average householder have risen by 3s. 4d. in the £.
I refer to the period of two and a half years because it was in November, 1965, that the Bill introducing the rate rebate scheme was put before the House. It is true that the England and Wales Order which we are discussing is made under the General Rate Act, 1967. But that was a consolidation Measure which embodied the Rating Act, 1966. The Order in respect of Scotland which we are discussing was made under the 1966 Act. The present figures of reckonable income appeared when the Bill was presented and were not altered in the six months or so between the First Reading and the Bill's receiving the Royal Assent in March, 1966.
Those figures, to put them into annual figures rather than half-yearly figures, which I find confusing, and the amendments to them are as follows. For a married couple, the Act provided that maximum relief would be given when the income did not exceed £520. In future, that figure will be £572 a year, an increase from £10 to £11 a week. For a single person, the annual figure of appropriate limit, as it is called in the Act, was £416 a year under the Act. Under the Order, it will be £468, an increase from £8 to £9 a week. But in both cases, if my mathematics are correct, the relief will amount to another 5s. a week, not taking into account further relief which may arise from the fact that there are dependent children residing with the ratepayer.
To put the position briefly, an increase in the appropriate limit by £1 means a decrease in the rates payable by 5s. I question whether this is, first, sufficient to restore the 1965 position and, secondly, whether it is the right way to do it—whether there should have been an increase right across the board, or whether the Government should have been selective in increasing the appropriate limit of income.
On the first point—whether the Orders will restore the 1965 position—the Index


of Retail Prices shows that there has been an increase of 5 per cent, between November, 1965, and May, 1968. Five per cent, of the £10 a week relief, or £10 a week appropriate limit, would account for a 10s. rise. But, in addition to this rise in the cost of living and drop in the value of money, the amount payable by the average ratepayer has substantially increased.
I have a quotation from what the then Minister said during the Second Reading of the Rating Bill:
The average householder in this country pays about £36 a year in rates."—[OFFICIAL REPORT, 6th December, 1965; Vol. 722, c. 47.]
He based his argument for the figures of reckonable income which he put into the Act on that basis. I think that he was taking a 1964 figure. My calculations show that at that time the figure was £37 a year. I arrive at that figure by taking the family expenditure survey, the average rateable value per householder, and the average rate poundage. This year, instead of being £36, the figure is £42. Therefore, the average householder is saddled with £6 more a year to pay in rates than he was paying when the Government made their calculations in 1965.
Therefore, in order to restore the 1965 position, there should be an increase in relief of 5s. in the £ on £6, which would account for £1 10s. Adding that to the 10s. which should take into account the rise in the cost of living, the increase in, for example, the £10 appropriate limit for the married couple should have been £2 and not £1 as proposed in the Order. Therefore, to restore the 1965 position, the amount proposed in the Order should be doubled—that is, basing the relief on the average man. But an increase of rates payable on lower rated property, without compensating relief, will hit those least able to pay.
That brings me to the second respect in which I think the Order is inadequate. The increase should have been selective. The Minister has power under the Act, when making an Order of this sort, to take into account the fact that it will have a different impact on different incomes. This Order alters what is called by the Act the reckonable income, which is, as the Parliamentary Secretary said, the gross income, plus the spouse's income, of the householder, disregarding

certain payments for board and lodging and certain rent from sub-tenants who are entitled to relief and disregarding income up to the appropriate limit. No other disregards are allowed by the Act, the appropriate limit being intended to take into account all those differences between the incomes of ratepayers.
I will not go into this in detail, but during the passage of the Bill we on this side pleaded for further relief to be given in special cases. Having seen how the Act has operated over the past two years, I think that Order should have been framed so as to take that into account and to be more selective, so as to bring disregards into the figure of appropriate limit appearing in the Act.
My hon. Friend the Member for Finch-ley (Mrs. Thatcher) threw out this challenge to the Minister during the debate on one Amendment on Report:
I am quite willing to put up a stake of £20 if he"—
that was the Minister—
will put up a contrary stake of £20, and 1 will bet him £20 that in the next Parliament his Bill will need amending with regard to charities and income disregards."—[OFFICIAL REPORT, 24th February, 1966; Vol. 725, c. 680.]
We have the amendment today so far as it increases the appropriate limit. I wonder if the Parliamentary Secretary will pay up the £20 for the Minister who has left the job. Under the Order the Minister could have taken that into account, having seen how the Act has worked. He could have varied the figures for different categories of ratepayers. It remains a good argument against the across the board increase that there should be greater relief in exceptional cases to take into account, for example, pensioners, whether old-age or disabled, and some of the extraordinary anomalies which have occurred in practice. For example, a payment for foster children is disregarded in a person's income for every other purpose except when he applies for a rate rebate. Such things could have been ironed out in the Order.
Many other anomalies have cropped up. To say that it could not be done, as the Parliamentary Secretary did, because it would increase the cost of administration and make it all too complex is a very defeatist attitude. What is wrong with the mere declaration of


some particular type of income when applying for relief? One has to make a declaration as to payments for board and lodging and as to rents received from a sub-tenant who is entitled to rebate. One could just as simply disclose other income which ought to be exempt when application is made for rebate.
In the course of the debates during the passage of the Bill it was forecast that 2 million people would receive benefit from the relief. We now know that only about half that number have received benefit. It was estimated that the cost to the Exchequer would be a certain sum of money which the Parliamentary Secretary said today has not had to be contributed by the Exchequer over the years in which the Act has been in operation. Therefore, previously there has been a wrong judgment about the number of beneficiaries and about the cost of the scheme to the Exchequer.
Although I welcome the principle of these Orders, I think that there is a wrong judgment again in the application of that principle and the Orders do not restore the position as it was when it was introduced and do not take into account the difficulties which have arisen in the administration of the Act, whereas they could have taken them into account by being more selective as to the present beneficiaries.

11.55 a.m.

Mr. Michael English: I part company with some of the things that the hon. Member for Crosby (Mr. Graham Page) said. I was fascinated by his exercise in political statistics. He originally pointed out that, according to his calculations, £42 is the current average for rates paid per household. Having earlier said that the Minister's figure of £36 was not, according to him, £36 but £37, the hon. Gentleman then took the Minister's figure to compare with his own higher figure, thus giving an increase of £6, £1 of which is merely the difference between his first calculation and the Minister's. That sort of increase in rates is what I call a political statistic rather than anything else.

Mr. Graham Page: I was using the £36 on which the Minister, as he said on Second Reading, had based his calculations. When I came to make the


present-day calculations, I found that, if I applied my same calculations for today to 1965, the figure worked out at £37. That does not alter the fact that the Minister based his calculations on £36.

Mr. English: The hon. Gentleman was perfectly honest to point out the defects in his own statistics. He nevertheless said that £6 was the difference, when he meant, on his own figures, £5.
Another point, one of much more substance, on which I part company with the hon. Gentleman is on the question of disregards. I share the view expressed by my hon. Friend the Joint Parliamentary Secretary. The more one puts into any scheme of this character questions of disregards, and so forth, the more one complicates it from an administrative point of view. One also complicates it from the point of view of the beneficiary. If the Order were other than it is, if it did not merely make the across-the-board increase to which the hon. Member for Crosby objects, it would, first, be a more complicated Order; secondly, it would be more complicated to administer; thirdly, and above all, it would be much more difficult for the average beneficiary to find his way round it.
It is obvious that any rebate scheme will miss many proper beneficiaries. The Minister estimated that one-third are missed, that only two-thirds of those who could claim do claim. If it is to be said, in addition, not merely that a person with less than £234, or whatever the figure is, can claim, but also that it must be less on an artificial basis, disregarding this pension, that pension and the other, it would become impossible for the average person to understand.
The trouble about many of these schemes—this, fortunately, is not a defect from which this scheme suffers—is that lawyers, like the hon. Member for Crosby and my hon. Friend the Joint Parliamentary Secretary—persons who are quite used to dealing with the complexities of words and terms—sit here thinking that beneficiaries of rebate schemes of this character will be as competent as they are to understand all the complexities that we put into schemes. That, it seems to me, is the crucial argument against the hon. Gentleman's proposal.
Second, the hon. Gentleman said that it was not unreasonable to ask people to state certain items of income. Again, one can answer quite simply by saying that, although it is not difficult or unreasonable to ask a person to do it once, the process ought not to be constantly repeated. Has the hon. Gentleman thought of how many times people within certain limits of income are asked to consider the selfsame question?

Mr. Graham Page: I realise that very well. For example, a constituent of mine recently told me that he had had to fill in a form every year to say that his leg had not grown again after he had lost it some time ago.

Mr. English: Exactly; this is the whole point. The hon. Gentleman says it is not unreasonable to ask people to make certain declarations, but the trouble is that, as schemes of this kind are extended, people are asked over and over again for the same or only slightly different information. The objection is not the objection of principle which the hon. Gentleman implies. The objection is to the frequency and the variety of application of:he same principle to the same people. It is bad administratively that large numbers of people are required to calculate levels of income, and it is bad also from the point of view of the publicity which we have had in mind. Above all, it is a burden upon people who in the end grow tired of the whole business and in many cases are inclined to say, "Although I may be able to claim something, I do not understand it and I shall have to fill in a lot of forms". Those are the objections to any complication of the scheme.
I have a general objection to schemes of this kind. Rebate systems of this character ought, in my view, to be replaced by a single scheme. I should be out of order if I went into the details of it, but I consider that particular rebates on particular subjects such as rents, rates and so forth, however good they may appear in themselves as individual items, defeat their object in the end by their complexity and variety because they become incomprehensible to the people most in need of benefit from them. To do it once by a sort of reverse Income Tax would be far better.

Mr. Speaker: Order. I have been equally tolerant with the hon. Gentle-

man, but he must now come back to the Order.

Mr. English: Thank you, Mr. Speaker. Your tolerance has, indeed, been noticeable.
Contrary to the view of the hon. Member for Crosby, I consider that the principle which the Minister has adopted in this Order ought to be supported. He has raised the limits. One could argue about whether he has raised them enough, but he has done it without complicating the scheme still further. I hope that the present two-thirds of possible beneficiaries will continue to benefit, and I hope that he will be able to increase that proportion.
I was most pleased, however, when I heard my hon. Friend say that he regarded the whole scheme as temporary, temporary until local government finance is reformed. I hope that he means until local government finance is reformed and the national review of social security is completed. The latter has as much relevance as local government finance in this context. However, I was very pleased to hear him say that he regarded it not as permanent but as a temporary scheme. On that basis, he is right merely to make an across-the-board increase, raising the limits though not complicating the scheme still further.

12.4 p.m.

Mr. R. F. H. Dobson: I welcome the Order and I congratulate my hon. Friend the Joint Parliamentary Secretary on his presentation of the information to the House. There is no doubt that the Order generally will make life a little more bearable for people in England and Wales who have to pay rates. I do not for a moment accept the perambulating mathematics presented by the hon. Member for Crosby (Mr. Graham Page). I found his calculations extremely difficult to follow. I had the impression that they were designed to show an end product and that the intervening sums were done accordingly. I am sure that the hon. Gentleman could have made a better job of welcoming the Order in much more emphatic terms than emerged from his slight reference at the end.
The first question which I wish to raise was touched on in an intervention


by my hon. Friend the Member for Croydon, South (Mr. Winnick). Under the Order, people can benefit although the household has a fairly high income. The Minister told us that a household with four children and an income up to £19 a week, or sometimes a little over that, could still benefit. This is a substantial level of income. To digress a moment, I cannot remember anything like it being suggested by the Conservative Party, even though it was the sort of income which Conservatives said that people ought to have. Nothing like it appeared during the Conservative period of office.
The fact that the level of income in a household can be as high as that without excluding rebate benefit underlines the need to ensure that all people who could take advantage know about the scheme. A good many people do not realise that the income limits are so high. It is true that many elderly people try to find out what the limits are, but I have never had a working man in my constituency ask me about the limits of income for rate rebate. Yet there must be hundreds, if not thousands, who earn less than the amounts to which my hon. Friend referred. There are many thousands of men with four children earning less than £19 or £20 a week, yet I have never had anyone come to me at my advice bureau, which I hold regularly, to ask about it. It is clear that there ought to be national publicity for the scheme on television. Few houses now are without television, and I hope that the Minister will do something along those lines.
Local authorities make adequate provision for publicity in local newspapers, but the impression always seems to be given that one is talking about retired people on low fixed incomes who might benefit from the scheme, not about the much wider range of householders who could make a claim. Even for the retired, publicity by television would be a welcome addition in many ways. Not everyone takes the local paper, and certainly not everyone reads the advertisement sections. People are far more likely to pay attention to the headlines. Elderly people need this extra assistance.
The need for publicity is shown by figures relating to Bristol which I obtained from the Minister last year. In the first half-year, the number of rebates

given in Bristol was 10,600, and in the second half year it was 12,300. Thus, the mere operation of the scheme meant that more and more people heard of it. Those who did have rebates were, on the whole, in the low-income retired pensioner bracket. It seems, therefore, that the Minister might well take the matter up with the National Federation of Old Age Pensions Associations. I am sure that this body could make a valuable contribution. The fact that in Bristol there could be an increase of 2,000 or so in a half-year shows the need to publicise the scheme in every possible way.
My hon. Friend the Minister said that the average national amount of rebate under the scheme is about £15—in Bristol last year it was £14 4s.—and, presumably, it will now go up under the present Order. I wish to bring to his attention, on the question of disregards, a point of particular relevance in university towns. This is where the limits of income can operate against people in certain categories, unless they are disregarded. There is still a large number of people on low fixed incomes —perhaps also no income—who are forced to take in lodgers or boarders because they live in large old houses. Under the Act, the income from this is not disregarded. I am thinking particularly of students. If they are paying £4 or £5 a week that can become the total income of the person in whose house they are residing. I have raised such cases with my hon. Friend and I had hoped that he might look at the question again. If such people's income is calculated at £20 a week, it is not really £20 because they must supply lodgings and sustenance to those living in the house with them. It is not an income in any sense of the word.
There is another section of the disregard which I should have liked my hon. Friend to look at, although it is very minor, concerning mixed hereditaments. In small back streets, some houses have a small shop attached which provides the householder with a very small income. I understand that the Act precludes them from getting the benefit from the sort of Order we are considering—

Mr. Speaker: Order. The hon. Gentleman cannot pursue in detail amendments which he cannot make to the Order.

Mr. Dobson: I had hoped that my hon. Friend would be able to find some way of mentioning disregards in the Order. The Order is a very valuable addition to the social security benefits to people with all types of small incomes. I have had great pleasure in speaking in support of it.

12.12 p.m.

Mr. Roy Roebuck: The hon. Member for Crosby (Mr. Graham Page) is to be congratulated on being the only Member of the Opposition who has had enough interest in this important matter to attend the House this morning. I do not know where his right hon. and hon. Friends are. Perhaps they are consulting Mr. Cohn-Bendit or somebody like that to see about having some sort of demonstration. They could be attending a teach-in—

Mr. Speaker: Order. The hon. Gentleman must not pursue the question of the likely places where Members of the Opposition are at present.

Mr. English: You will be aware, Mr. Speaker, that most hon. Members do not wish to pursue that question.

Mr. Roebuck: You stopped me just in time, Mr. Speaker, I was about to go even further down the scale.
That is the only compliment I shall pay to the hon. Gentleman, because I thought that his speech was sourer than his speeches usually are. A man from Mars who listened to his curmudgeonly observations about the Order might have gone away with the impression that the hon. Gentleman and his hon. Friends would be in favour of increasing the limits in the Order; but I see no reason why we should accept the implication of what he said today when we can read the book. For me, the book says that when he and his hon. Friends were in power none of my constituents in need of rate relief received a brass farthing, whereas now many hundreds have received substantial rate relief. I believe that under the Order many more will receive relief.
It is not true to say, as the hon. Gentleman said, that the Order is possibly necessary because of an increase in rates. Largely as a result of the excellent increase in grants given by the Government, the rates in my borough have fallen for

the past two years, a splendid arrangement for which all my constituents are extremely grateful.

Mr. Dobson: Can my hon. Friend remember any one year since the war when the rates went down?

Mr. Speaker: Order. The hon. Gentleman may remember, but he must keep it to himself.

Mr. Roebuck: I can think of no one who can obliterate from my mind all sorts of terrible memories better than you, Mr. Speaker.
I do not want to speak for long because that would perhaps be unfair to hon. Members opposite who have other things to do. I support what was said by my hon. Friends the Members for Croydon, South (Mr. Winnick) and Bristol, North-East (Mr. Dobson) about the need for much more publicity for the rate rebate scheme. I do not think that it is sufficient that we should have advertisements of the rather dreary sort to which my hon. Friend the Member for Bristol, North-East referred. Much more could be done by local councils with the rate demands. I believe that all councils now send a note on the back of their rate demands saying that persons can claim rate rebates. But they have been drearily worded and have not been typographically arresting. My hon. Friend might take advice on this and send a circular to local councils with a model form of announcement. This would be of great assistance to many people who would benefit from the Order, particularly as many of them are rather old and perhaps not inclined to read the small print.

Mr. Graham Page: That is an interesting point. But is it not those who are not paying the rates direct who are losing the benefit? They do not receive a rate demand and do not realise what they are paying.

Mr. Roebuck: I am obliged to the hon. Gentleman. There is a great deal in what he says. The people we must go after to make sure they understand about this are often the council tenants, as was mentioned by my hon. Friend for Croydon, South, and the private tenants who pay their rates with their rent. Many do not know about the rebate.
A suggestion was made in the House some time ago that rent books should contain a statutory notice to this effect. I am not sure whether that is feasible; but anything which can be done to make more widely known the great benefits which my hon. Friend and other members of the Government are offering poorer ratepayers should be adopted. I congratulate my hon. Friend and my right hon. Friend the Minister of Housing and Local Government for improving the lot of the poorer people of this country.

12.18 p.m.

Mr. Skeffington: With the leave of the House, I should like to reply to one or two points and give the information courteously requested from both sides of the House.
The hon. Member for Crosby (Mr. Graham Page), like Oliver Twist, always wants more, and I do not blame him. But it is a question of what is possible in all the circumstances from the point of view of both the national and local administration. I thought that the hon. Gentleman was not facing up to the position when he referred to general average increases in rate demands, because we are dealing in the Order not with a contribution to the average ratepayer but the contribution which we feel we should make to the householder who is less well-off, whether because his income is small or because he has a very large family.
I hope that the House will bear in mind that the average ratepayer has also been helped by the domestic element we have given in the contribution to the local authorities of 5d. and 10d., which is worth £30 million and £60 million. For that reason, a very large number of local authorities were able to show no increase in their rate demands. Figures produced by the Rating and Valuation Association show that in 1967–68 42 per cent, of the local authorities reduced their rate demands and in 1968–69 38 per cent, did so. In those two years, 14 per cent, and 15 per cent, had an unchanged rate poundage, which means that more than half the authorities either reduced or did not increase their demands. Increases were less than 6d. in the £ for 31 per cent, in 1967–68 and 23 per cent, in 1968–69.
I mention these figures only because I think it fair to do so. If one took the average rates payment in £ s. d. one would fail to realise the contribution that has been made over the whole field to all categories, although the Order deals only with the householder whose income is small, for which reason he is given relief.
Looking at the domestic rate poundage in England and Wales, one finds that from 1966–67 to 1967–68 there was practically no change and that between 1967– 68 and 1968–69 there was a change of 0–7 per cent, These figures ought to be put on the record so that we can see the picture as a whole.
I am grateful to hon. Gentlemen on both sides who have referred to publicity. We do a great deal. Television programmes, films and talks have been arranged in the past, and we shall consider doing this in the future. There was the suggestion that voluntary organisations should be consulted. We have done that and shall do it again in the future. We have also asked rent officers and others to draw this matter to the attention of those who come to see them. I give an undertaking that we shall take every step possible to bring these schemes to the notice of those who are likely to be most affected.
Although it is true that the take-up is nothing like 100 per cent,, and although we expect the figures to go back to over 1 million recipients, I do not want even there to overplay this. There must be, we calculate, about 3½ million ratepayers whose rate liability is very small, probably less than £15 a year or 6s. a week. We appreciate that some people do not want to go to the bother of claiming when the sum is comparatively small, but we shall do our best to bring this matter home to all those who are concerned.
On the subject of different categories, the hon. Member for Crosby said that he would have liked us to provide some further selectivity. I am not sure where in the Bill he thinks this could be done. He was a member of the Committee which considered this matter. The hon. Gentleman said that we could do it in terms. I do not think it can be done under Schedule 9. However, no doubt, with his usual ingenuity, the hon. Gentleman has found some way. Perhaps he will privately let me know how it can be


done, and then we can pursue the point in private. The object at the moment was to keep the scheme simple and give the benefit where the shoe pinches most, and do it in a way which is within the staff complement of local authorities and their abilities to operate. I believe that we have done that and that the Order will substantially restore the position—

Mr. Graham Page: I will tell the hon. Member in public, not in private, how he could have done it. The Act gives the Minister power by order to vary the appropriate limits. He could vary them for different categories of people. That is what I was suggesting.

Mr. Skeffington: I should like to look at this further. I am not suggesting that we should do it because of the reasons that I have given. I am not sure whether we have the power to do it, but I will look at the matter again and perhaps have a further word with the hon. Member.
My right hon. Friend and I are very grateful for the general reception given to the Order, and I hope that its contents will become widely known in the country.

Question put and agreed to.

Resolved,
That the Rate Rebates (Limits of Income) Order 1968, a draft of which was laid before this House on 29th May, be approved.

Motion made, Question proposed,
That the Rate Rebates (Limits of Income) (Scotland) Order 1968. a draft of which was

laid before this House on 29th May, be approved.—[Mr. Buchan.]

Mr. Speaker: The Question is—

12.23 p.m.

Mr. John Robertson: Mr. John Robertson (Paisley) rose—

Mr. Speaker: Order. I suspected that this would happen. We decided to take the two Orders together. Apparently the hon. Member for Paisley (Mr. Robertson) came in late and the information did not percolate to him. However, I have no objection to his speaking before I put the second Question.

Mr. Robertson: Thank you very much, Mr. Speaker.
I congratulate my right hon. Friend and hon. Friend on bringing forward this Order. I have two suggestions only to make. One has already been discussed. Publicity is most important.
Not all local authorities are doing a good job in this regard. By and large, the position is working out, but we should like more information about how the scheme is working and would like to know in what local authority areas there seems to be some reluctance on the part of the people to come forward and claim rebates.
With those two suggestions, I welcome the Order. I again congratulate my right hon. Friend and my hon. Friend, who brought the Order forward without any prompting from the Opposition benches.

Question put and agreed to.

Orders of the Day — COMPUTER INDUSTRY (MERGER SCHEME)

12.25 p.m.

The Minister of Technology (Mr. Anthony Wedgwood Benn): I beg to move,
That the Computers Merger Scheme, 1968, a draft of which was laid before this House on 11th June, be approved.
This is the first industrial investment scheme made under Sections 1 and 2 of the Industrial Expansion Act, which received the Royal Assent on 30th May.
The merger which the House is being invited to authorise between International Computers & Tabulators Ltd. and English Electric Computers Ltd. represents for us the culmination of a policy for the computer industry which my Ministry has been pursuing for three and a half years.
When the Ministry of Technology was set up in October, 1964, computers was one of the industries for which it was given responsibility, and since then a major element in our policy has been to work towards a strong British-owned independent Business and Scientific Computer Company able to compete effectively with the American companies and their European subsidiaries, able to provide the management and organisation required and to attract staff and capital in order to expand rapidly and meet the very great growth in the United Kingdom and overseas markets, and, if this seemed desirable—and this may be of importance later—in wider international groupings.
I have one word to say about the reasons for our policy which has culminated in the presentation of the Order. It is a fact that there is rapid expansion in the use of computers in this country and everywhere else in the world. In a sense we began our work, as we do in every area in which we are engaged, by identifying the need and seeing how it could be met. In the last 10 years the market growth of computers has exceeded 25 per cent, a year in value, and this rate of expansion is likely to continue for many years.
The plain fact is that if a substantial part of the increase is not supplied from British factories, the balance of payments will suffer very heavily. There is a great

deal of anxiety about the flood of imports into this country, and there is no doubt that our capacity to meet our own needs in the products of advanced technology will play a considerable part in our future success or failure in balance of payments problems.
As is well known—we announced it in the House—one of the aims of our policies has been to ensure that there is a purchase of computers made in Britain, whether by British firms or British subsidiaries of foreign firms, wherever this is possible. Every case is considered on its merits. There is an attempt to make an objective assessment of all suitable equipment, price being only one of the factors taken into account. But I must make clear that the use of computers and, I must say, of computer technology is so fundamental to our future industrial structure and competitive power that we cannot as a nation afford to depend wholly on foreign or foreign-controlled manufacturers.
At the very beginning of the establishment of my Department the individual units of the British owned industry were not strong enough to face the intense competition from their larger rivals. There is no doubt that in the computer business as in some other businesses, though not all, the importance of scale is paramount. The companies in the industry are characterised, at the moment, like many other technological industries, by their high costs of research and development, and in this very rapidly changing technology no company can stay long in the business unless it is able to offer the very latest equipment.
Moreover, the computer companies must provide, at considerable cost, engineers and the softwear experts and maintenance staff to back up their sales, however small those sales may be in the company's beginning in any particular market, and the more work we have done on computer problems in my Department the more the whole approach and work on applications of computers is seen to be important.
If one goes back again to 1964–65, one sees that the three major British-owned computer manufacturers found themselves in competition with American companies which had had the enormous advantage of basing their activities on a


very large American market, including great expenditure on defence and space. I made; reference to this fact when we debated the Industrial Expansion Bill as it went through the House. There is no doubt that this expenditure in a large American market backed by defence and space spending has enabled the American computer manufacturers, with the associated micro-electronic and component manufacturers, to spread the very high cost of research and development over their world wide sales.
It became quite clear to us that if the British computer industry was to continue to exist and compete technically, it required not only to sell more computers at home and abroad but also to rationalise its activities. My right hon. Friend and predecessor, Frank Cousins, made a policy statement in the House in 1965, in which he recognised the special problems facing the computer industry. He announced an expansion of the existing programme of Government supported advanced research in the industry, and this is now running at an annual cost to the Government of over £1 million a year. He also announced that the N.R.D.C. would be making up to £5 million available to l.C.T. to assist in the introduction of its new computer range: £4 million of his sum has been taken up.
I should like to pay tribute to Frank Cousins and the decision he then took, because it is widely recognised, and generously recognised, in the industry that without that decision by Frank Cousins the British computer industry might well not have been able to get the start necessary to bring us to the point we have reached today.
In addition to this, my Department has also made a substantial contribution towards ways and means of stimulating an increased use of computers. The reason is twofold. First, it is essential to have a wider use of computers if we are to modernise British industry. By that, I do not just mean the replacement of clerical slave labour but the use of computers in management. Second, we recognise that by this means British industry will be made more competitive in world markets.
If one looks at the range of services we have developed we find that it is quite formidable. There is the National Com-

puting Centre and the advanced computer techniques programmes, with the contacts that go with them. There has been the support of the Flowers recommendations for the acquisition of computers for universities, which is of great importance. There is the Aldermaston project for the application of computers to engineering techniques which has considerable relevance to engineering. If we extend the use of computers into the machine tools industry, there has been the numerically controlled advisory and administration services, and there is the National Data Processing Service as well, with which I was associated when I had my previous job as Postmaster-General.
All these programmes have been developed with a view to stimulating the use of computers and of encouraging the industry itself. Now, partly as a result of this and partly because of the increased rate of growth, the sales of British computers have very rapidly increased in the past three years, but the need still remains to bring about a measure of rationalisation so as to avoid duplication of research and development effort, in the sales and service organisations as well as for the purpose of stimulating the efficient use of computers.
The merger last autumn of Elliott Automation with English Electric, which the I.R.C. supported, was a very valuable step in this direction, but we always regarded the main approach here—and when I say " we " I think of industrial interests as well as the Government, because there has been a general consensus of view on this for some time— as being a further merger. The idea that l.C.T. and English Electric should merge their computer interests came up at an early date, but looking back over the last two years during which I have been responsible in an overall sense for this work, one can recall very formidable commercial and financial difficulties.
But, making this much worse, was the fact that the two companies were operating systems which were markedly different the one from the other. The difficulty about trying to approach this as a financial or management merger was that one could not by that alone have solved this basic technical difficulty. We were determined that in bringing about this agreeable objective we should not leave the customers of one or other group


unsupported in the future, but that the new company would have to continue to manufacture and service both ranges of equipment and, at the same time, provide compatibility for the future.
This deadlock was broken last year, when it was agreed that a group of technical experts—the wise men—from the two companies should consider the technical issues and see what could be the basis for their merging. It was concluded, really quite rapidly and very satisfying for all of us, that it would be possible to design the next generation of computers in such a way that not only would it be highly competitive, as it will be, both technically and commercially, but would be capable of accepting the transfer of work of both the present English Electric System 4 and the I.C.T. 1900 ranges without difficulty.
This was the stage which we had reached by about this time last year. At that time, we had a new element in the situation of great importance, and that was the decision of the Plessey Company, a major manufacturer of telecommunications equipment, to seek to participate in this operation upon which we were engaged. The motivation of Plessey is not hard for anyone who follows these things to understand. It recognised, as I think everyone does, that computer and telecommunication developments were going in parallel and that in order to get the maximum advantage of both one needed to have some link between them. This also allowed Plessey to make some financial contribution to the capital necessary, and a significant technical contribution to the study of this convergence between the two technologies of telecommunications and data processing. It was really as a result of the discussions with Plessey, and based upon the earlier talks we had held with the two main companies, that we were able to arrive earlier this year at the scheme which I announced in the House on 21st March.
I should like, not in a formal way but in a very direct and personal way, to pay tribute to the three leading figures concerned—Colonel Maxwell, Lord Nelson and Field Marshall Lord Harding, who throughout long months of difficult nego-

tiations made it as easy as it was possible to make it for us to find a solution of these problems. It is not customary, I am advised, to pay tribute or to refer to one's own officials, but I must say that in this work we had the most enjoyable relationships and the warmest possible co-operation with both sides. This enabled me to come forward with the merger project as I announced it in the House in March.
The House will know the details of the merger, and they are described very fully in the documents. The merger is to take place through a holding company —International Computers (Holdings) Limited—which now exists, and which will, when the scheme comes to fruition, have an issued shared capital of £33 million. This holding company will acquire all the shares in I.C.T. —which will change its name to International Computers Limited—I.C.L.—and all the shares in English Electric, in exchange for fully paid ordinary shares in International Computers (Holdings) Limited. The Plessey Company will subscribe for 6 million shares in International Computers (Holding) at 60s. and—and this is where we come in—I propose, with the assent of the House today, to subscribe for 3½ million at par. In addition to that, the Government, the Minister of Technology, will also be providing up to £13,500,000 by way of grants and general support for the research and development expenditure of the new company over a period of four years up to 1971, subject to certain conditions, which are described.
In addition to this arrangement, which is the basic plan, a joint Plessey-I.C.L. development company will study and develop the convergence between computers and telecommunications. This is the basis of the complex arrangements which are being brought to the House today. I should add that, in addition to the authorisation which I am seeking today through the Order, there will be provision for the first instalment of share purchase and the first payment towards research and development grants, which will be done by means of a supplementary estimate shortly to come before the House. So there will be this double opportunity to consider the matter in the House of Commons.
As I. said when we debated the Industrial Expansion Bill in Standing Committee, it was my intention and determination that the House should hvae the fullest possible information about the Government's participation in any draft scheme brought forward under that Bill. I hope that hon. Members will agree that in this instance the promise has been amply and over-fulfilled. The Instrument is in common form, but it includes the text of the agreement which I have made with the companies. The House will have noted that the agreement is subject to the approval of the draft Instrument, so that by this process I have not pre-empted the authority of the House of Commons. In addition, I have published a White Paper, Cmnd. 3660 which provides substantially more information about the project and the background to it. Finally, as hon. Members know, I have made available in the Vote Office and in the Library copies of other relevant documents.
In view of the bundle of information available to the House, I think that hon. Members will agree that the House of Commons has never in the whole of its history been given so much information to enable it to reach a judgment before a decision was made by the Government. Compared with the amounts of money spent in other areas of technology, launching aid for aircraft and so on, the House has never had anything like as much information. I hope that in view of that hon. Members will recognise that what I said about the Industrial Expansion Bill being a genuine attempt to bring Parliament into the business of Government relations with industry was not mere talk in this case, and, as a Parliamentarian, I am very pleased about that.
There are certain things which I have not been able to tell the House, and I want to say why. I cannot present full information of the projected turnover, research and development expenditure and the profits of the new company, as this is commercially secret information and, as it would be of value to competitors of I.C.L., it would be wrong to disclose it. Nevertheless, I have seen these figures myself and I have engaged commercial advisers, Cooper Brothers, who have examined them in great detail, and I am satisfied that they are realistic.
The new company's prospects in general terms are roughly these. It must be able to establish in the long run a position of financial strength and profitability to enable it to carry conviction with potential customers, to support an adequate research and development effort, and to raise money for itself, both out of retained profits and on the market. The new company will go through a period of very heavy expenditure, arising mainly from the need to increase its research and development expenditure for the next generation of computers. This increase cannot be met out of current income if the company is to remain commercially viable, and that is why it has been necessary to increase public support for research and development above that previously made available.
Of course, as compared with the Americans, we are doing it in a much more cost-effective way. It is not a byproduct of other expenditure on projects which might not justify themselves. We are going directly to the heart of this matter, which is money for computers and making it available in the way which I propose.
This is very much in line with the Government's general policy to give assistance which is required to maintain and develop significant technological advance in British industry. The Government have to look at various ways of providing support according to circumstances. In some individual cases—and this applies to aircraft projects—it has been done by a levy on sales, and it is appropriate to have a levy on sales of other equipment which has received some form of Government help.
But the finance for research and development for the new computer company which we are making available is concerned with the entire product range of the company, and it therefore seems appropriate in this case to seek to get a consideration in return dependent on the progress of the company as a whole. We are now talking specifics and not ideological and theoretical considerations, and that seems to be a strong case for the Government holding.
What we are doing is to acquire a 10·5 per cent, shareholding at par, paid as to 2s. a share now, with the remaining 18s. in 1972. The current market value


of these shares already substantially exceeds the amount to be subscribed for them and, if the company is successful, and we think that it will be, the value of these shares will rise still further, with very considerable benefit to us as shareholders after 1972. In case anyone raises this issue, I should add that the Government's participation in the company has been genuinely welcomed by the other three parties concerned. I am not exaggerating in any sense when I say that they regarded it as essential to the success of what we are trying to achieve.
It is not my intention that the Government shareholding should be used as such to intervene in the day-to-day management of the new company. In common with other major shareholders, I have the right to nominate a director to the board, and this is understood. But the relationship between the Government and the company, which is the subject of the agreement, the text of which is in the Schedule to the draft Instrument, ought to provide for our interests being fairly clearly laid down. We are particularly concerned with the research and the development policy of the company. The payment in full of the Government grants will be dependent on a minimum increase in the company's research and development expenditure. I shall receive regular reports on this R. and D. programme, which will be the subject of discussion between the company and officials of my Ministry.
The reason for this, of course, is that we are a major computer user and, as a user if for no other reason, we want to have an opportunity to influence, as far as we can consistent with commercial considerations, the direction of the R. and D. programme. It will also help to secure co-ordination with the many computer R. and D. activities taking place in Government research establishments and those taking place elsewhere in that industry. We regard our own research and development effort inside our own establishments as being a part of our general support policy for the industry as a whole. It is the intention that the company's development programme should include not only the development of a new range of computers for the 1970s, but also, as I have described, that it should be fully compatible with the exist-

ing system and also the development of a large computer system to meet the needs of Government Departments, universities and other expected customers at home and overseas.
The result of all these arrangements will be that International Computers (Holdings) will be the largest company outside the United States specialising in commercial and scientific computers. Unlike other countries which are now trying to develop their own indigenous industries, we in Britain have a substantial computer capability, and this is thanks to the enterprise and farsightedness of the men in the industry, and I should like to thank them, too, for their help in what we have been able to do.
The reason for these measures is that we want this desirable state of affairs to continue on an expanding and competitive basis. I am sure that it will bring many advantages to this country. This key industry, with its advanced technology, can make a major contribution to the efficiency of our economy and to the development of related technologies.
It will also make a notable contribution to our balance of payments prom-lem, both by reducing our reliance on imported equipment and by exporting equipment. To give an example it is expected that I.C.L. this year will sell £26 million worth of computers overseas. This represents about one quarter of the total operations, of the company, or about one third of I.C.T.'s turnover alone. This is a sizeable sum, considering the country's current balance of payment difficulties. The company has a very praiseworthy export record, and there is no reason why we should not develop exports further and compete successfully in world markets. One of the reasons why the technological agreements with Eastern Europe and the Soviet Union are so important is that we have hopes in this direction as well.
The I.C.L. although it is a big merger, does not have a monopoly in the United Kingdom. It is worth saying this, because some people have spoken about it as a new giant. It will face very strong competition from American-owned firms manufacturing in this country, and from firms marketing imported equipment. I assure the House that there is no intention of pursuing a policy of cybernetic


autarchy. We do not want to cut Britain off from the many benefits we obtain, from access to foreign technology.
We do not intend to pursue a narrow notionalistic policy, and the company has made it clear that it is willing and anxious to collaborate in joint projects with firms in other countries for the mutual benefit of both parties, and this may have some effect on the development of European policy. It also relates to what I said earlier about wider international groupings.

Mr. Eric Lubbock: I do not sympathise with this attitude, but it has been represented to me that the merger in this country will make it more difficult for us to co-operate with European firms. Would the right hon. Gentleman like to say a word or two about that?

Mr. Benn: I would be glad to, because when we were considering our computer policy, we had to ask ourselves whether it would be right to go for the international linkage, based on two British companies or to go for the British companies as the first stage in our thinking about international groupings. We concluded that to leave two British companies pursuing different technologies, separate from one another, and by themselves very small firms by American standards, would have been a great mistake. The question the hon. Gentleman asked was one of the first that we asked before we began our consideration of this matter. When one is faced with the sort of scale of operation of some of the major world competitors I do not think that he needs to be too anxious on that score.
It seems that the proposals before the House represent a new and useful approach to collaboration between government and industry. We are dealing with an industry in the advanced technological sphere, beset by unique problems of a commercial and technical nature, in a situation where no other country in the world has succeeded in establishing and maintaining a computer industry without substantial Government support, direct or indirect.
This is why we brought forward this scheme which is, in the opinion of the industry and the Ministry of Technology, most likely to meet the industry's essen-

tial requirements, without excessive Government expenditure or Government control by interference. This is a public enterprise. It is not a nationalisation; it is not our intention to take over control. We are not subsidising unprofitable operations, which is always one of the great fears of Government intervening in industry. We had a lot of it in our discussions about lame ducks and white elephants.
What we are doing, if I can take a phrase from Lord Butler, is investing in success. We are identifying success and trying to help it along. The Government's contribution is directly limited, and is based upon, a realistic assessment of the commercial situation. We believe that by means of this measure, I.C.L. will expand, be profitable and consequently, the Government's stake in the company, will reflect the profitability which we hope to bring about.
This has been carried out with the full co-operation of the firms, which have encouraged Government participation. By this means we shall be achieving the objective set ourselves nearly three and a half years ago. It has taken a long time to bring this to fruition, but it will mean that the British computer industry has a secure base. I would like to try to draw from this story some lessons about the work of the Department in this area. I have been there just two years, the Department has existed nearly twice as long. The more one thinks about the problem the less one is concerned with research, or the management of the assets that came to the Ministry at the time of the merger, and the more one finds that the new focus of our effort is really this business of making a contribution, through the advance and modernisation of British industry, to the solution of our balance of payments problem.
The Ministry of Technology really exists to help to make money for Britain and everything else we do, whether in industrial policy or R. & D. in our own establishments, has to be harnessed to this purpose. It is now, in a sense, a major economic Department, directing its efforts to the central problem of the balance of payments situation. We are trying to do this in an entrepreneurial spirit and since the House, through this


new procedure, is able to join in this operation, I hope that a Parliamentary entrepreneurial spirit will lead it to pass this Order.

12.56 p.m.

Mr. David Price: First, for the record I must declare two personal interests. I am a very small shareholder in two of the companies involved in this merger. 1 emphasise " very small".

Mr. Benn: So am I.

Mr. Price: Secondly, and by contrast, I have a constituency interest in the fortunes of I.B.M. as the majority of the staff at the I.B.M. United Kingdom laboratory are constituents of mine. The conflict between these two interests ensures that my approach to this Order is entirely objective. I should also like to thank the Minister for making available to the House the details of the financial arrangements involved in the formation of this new British computer company.
The Minister will recognise that we do not have all the necessary commercial, technical and managerial information upon which to make a mature judgment as to the merits and prospects of this project. I appreciate that much of the information which we should like to have inevitably falls into the area of commercial confidence. For instance, sales forecasts of the new company, its profit forecasts, the annual target for return on capital, the R. and D. programme, indeed the whole forward strategy, must fall into this category.
I would not press the Government to give us more information than is commercially prudent, to make public the sort of information which would prejudice the chances of commercial success of I.C.L. On the other hand, it puts the House in a somewhat difficult position, as we are being asked to approve arrangements without the full technical and commercial information, which as businessmen we would normally expect before making a judgment as to the viability of the scheme. We have to take this on the trust of the Government and the three participating companies. Hon. Members can take their choice as to which trust they most prefer.

Mr. R. F. H. Dobson: Will the hon. Gentleman agree that there is another alternative, that we can take the judgment of all four parties?

Mr. Price: That is another alternative. We have a substantial body of what I would call external information bearing upon this problem. This assists us in making up our minds on this scheme.

Mr. Benn: Would the hon. Gentleman agree that the House has as much information as any other shareholder also having to make up his mind whether to participate?

Mr. Price: Yes, I would accept that. The external information suggests that there is a respectable general case in favour of the amalgamation of the two major commercial and scientific computer businesses in Britain. This is certainly not a wild proposition. On the contrary, in my view a sound general case can be, and has been made out in broad support of such an amalgamation. It is a difficult step for me to move from a general appreciation and support of the case to enthusiastic support for the precise project embodied in this scheme. No doubt if I had the full information which is available to the right hon. Gentleman, I might be as enthusiastic as he is, but as I have not he will forgive me if 1 do not join completely with him in his enthusiasm for this project.
I intend to ask a number of detailed questions, but these are minor matters compared with the broad concept of this merger. I assure the right hon. Gentleman that I am as enthusiastic as he is as to the potential for Britain of a strong indigenous computer industry, provided always that it makes economic sense. I am sure the Government will agree that the first priority in the matter of computers is for Britain to use them properly and enthusiastically to raise the general level of productivity.
The second priority is for a strong indigenous computer manufacturing industry, but this is the second one and should never override the first. I agree that it is right to buy British and to support British in this field but the critical question is, at what price? We should all agree that when other factors are equal we naturally should buy British. Most of us would go a great deal further and


accept a degree of cost disadvantage in buying British, but the question is, how much of a disadvantage? I am doubtful whether such a question is amenable to a fixed and predetermined answer. I am inclined to think that each case has to be considered in the particular and that a general view is dangerous.

Mr. Eric Lubbock: If we manage to sell as much as £26 million worth of computers in overseas markets in the current year there cannot be any disadvantage in purchasing British computers which are attractive to third parties. I think this is obvious.

Mr. Benn: I do not think the hon. Member for Eastleigh (Dr. David Price) would want to give the impression that anyone buying a British computer would be at a time disadvantage. In fact I.C.T. is very highly competitive in the fields in which it is developing.

Mr. Price: I shall develop this thought further. It has arisen particularly over large machines. We need not go back over the: history. I am not anxious to prejudice the reputation of the British computer industry, but the Minister knows that there has been cases of this in the past. It would be a mistake for the fight hon. Gentleman to introduce the equivalent of the Buy American Act and put forward a precise formula as to the conditions under which a British machine will be bought as against a foreign machine.
It is right for the Government to support the indigenous British computer manufacturer through its use of public purchasing, but it would be wrong to insist that the whole public sector should buy British irrespective of price and performance. This dilemma could be increased by the merger which we are discussing. I do not know whether the Minister saw Mr. Rex Malik's article in this month's Data Systems. I am in no position to evaluate Mr. Malik's evidence, but I have previously come across this sort of criticism, although perhaps not so forcibly expressed as in Mr. Malik's article. I invite the Parliamentary Secretary when he replies to the debate to answer this criticism because it should be answered.

Mr. Malik said:: From this summer we have only one major, officially approved British computer

manufacturer, one in which the Government have a £17 million stake. In this situation I should have thought that placing the burden of making objective technical recommendations and then having to recommend Buy British is likely, to put it at its mildest, to place civil servants in an invidious position?
I should be grateful if the Parliamentary Secretary would reply to that criticism.
There is the further problem of how the Government define a British-built computer. Is it determined on the nationality of the ultimate ownership of the company concerned? Is it upon the company's contribution to exports and the balance of payments or is it, upon the British content of the final computer assembly? Or is it upon the national origin of the design of the system? These are not easy questions to answer, but the House would like to have the benefit of some comment upon them from the Parliamentary Secretary.
This leads me to the key question, which is central to the relevancy of the Order. Should Britain attempt to maintain an indigenous computer industry and, if so, how far should taxpayers' money be used to ensure its survival? What are the cost benefits to the nation which justify such public support? I realise that these are not popular questions to put to British computer enthusiasts, but nevertheless they have to be asked and answered. The- argument in favour of an indigenous industry runs as follows. Computer manufacture is one of those high added value industries of which Lord Plowden and his colleagues spoke in the context of aircraft manufacture, and upon which the future health of our economy must increasingly depend, but it also raises many of the same problems as those encountered in the aircraft industry.
It is true that computer sales are not nearly so dependent on the military market as are aircraft sales. Nor is computer development in the United States of America so closely linked to military needs as aircraft. Nevertheless we can see in the British computer industry some of the perplexing features of the British aircraft industry. The dilemma posed by the Plowden Committee in relation to aircraft can be translated directly into the context of computers. In coming to a decision on the Order, the House must face this dilemma.
The Plowden Committee's Report said, in paragraph 206:
The aircraft industry embodies a basic dilemma.
I would say the computer industry also—
In terms of production it is exactly the sort of industry on which Britain should concentrate. It has a high proportion of value-added, or a high conversion ratio; that is to say its products contain relatively little imported material and most of the value of the finished article derives from work carried out in British factories. It tends to use large numbers of work people in relation to capital employed, but much of the labour is highly trained and skilled … On the other hand, aircraft overheads, ….
In this context I read "computer overheads"—
in the form of development and initial production costs, are high and rising in relation to variable production costs. Hence unit costs are crucially dependent on the size of the market. The relatively large American domestic markets, both military and civil, put Britain at a serious disadvantage in relation to the United States.
That analysis applies equally to our computer industry. I trust that the House has spotted the significance of the penultimate sentence:
Hence unit costs are crucially dependent on the size of the market.
I therefore ask whether Britain is a large enough market to support a viable computer company which attempts to market as wide a range of computers as I.C.L. will be offering. Statisticians tell us that by the end of last year 1,400 computers have been installed in Britain, 2,000 may have been installed by the end of this year and 2,800 by the end of next year. By contrast they tell us that 50,000 computers are installed within the Western world, of which 35,000 are in the United States of America. Within the home market I understand I.C.L. has something of the order of half—it may be more—of the current orders. This is a growth market, but even a growth market in Britain with as high a rate as 20 per cent,—the Economist forecast—does not provide a sufficiently large market to sustain a viable computer company of I.C.L's range.
I believe that the minimum scale of market is Europe and I am sustained in that view by the practices of the market leader, I.B.M., who do not manufacture and market in Britain alone or

in Germany alone or in France alone. They manufacture and market on a European basis. I am also sustained in my opinion by the views of the right hon. Gentleman. In his statement to the House on 23rd April, the right hon. Gentleman said:
European scale industries are essential if we are to generate the vast sums required for research, development and marketing to allow Europe to compete industrially on more or less equal terms with the advanced technological industries of the United States. This need is urgent and critical to the very existence of certain industries with a great growth potential, such as computers, electronics, airframes and nuclear energy ".—[OFFICIAL REPORT, 23rd April 1968; Vol. 763, c. 42.]
I agree entirely with that view.
But the logic of it is that the two leading British computer firms should have been encouraged to find European partners. Possibly they tried and failed. I am not in a position to judge whether the right hon. Gentleman was right in what I gather is his view that it was better for English Electric and I.C.T. to come together first before seeking European partners. But I hope that the new I.C.L. will press ahead to seek a European partner—and I say "partner" rather than ad hoc arrangements. I believe that to get the industry to the minimum critical mass which will be necessary to take on the market leaders of the world and to sustain that effort, we need to have these European connections. I hope that the arrangements proposed in the Order are not the end of the story.
Having said that, I turn to the details of the proposal before us. It may well be that the formation of I.C.L. was the best that could be achieved. Certainly in terms of viability it begins to make sense. No doubt there will be problems in the immediate future for I.C.L. in attempting to sustain on the market the 1900 series, system 4, and the Elliott 4100 range within a unified company effort. The true test of the validity of the merger will lie in their commercial performance in the 1970s, and I shall later say a word about that. In the meantime, the company and their staff would do well to follow the advice of John Henry Newman,
a thousand difficulties do not make a doubt
I hope that the Parliamentary Secretary will tell us why it has proved necessary to have four classes of ordinary


shares. I have read the supporting documents but I do not quite follow the rationale behind the decision. There are to be ordinary shares, A ordinary, B ordinary and C ordinary. In view of the very high reputation of the financial advisers to the companies concerned, there is no doubt very good reason for that. But to the outsider who is not quite so learned in the ways of the City as are some hon. Members, it is a little perplexing. Will the Parliamentary Secretary also tell us why English Electric told their shareholders that the transfer of English Electric computer assets to the new company dates from 31st December, 1967, when the Minister did not make his statement until 21st March, 1968 and the relevant Order comes into operation on 8th July? Is not that jumping the gun or was there some good reason for it?
Next, there is the question of the N.R.D.C.'s interest in I.C.T. In his statement of 21st March, the Minister told the House:
There will be a revision of the existing arrangements between the N.R.D.C. and I.C.T. which will bring forward the repayment of the money advanced by the N.R.D.C."—[OFFICIAL REPORT, 21st March 1968; Vol. 760, c. 609–10.]
The Order tells us nothing about the arrangements, but, clearly, they are relevant both to the capital structure and, even more particularly, to the cash flow of I.C.L. I hope that the Parliamentary Secretary will say something about that.
There are two points embodied in the arrangements for the formation of I.C.L. which I should like to commend, in particular, to the House. The first is the decision of the Board of Trade not to refer the proposed merger to the Monopolies Commission. I am sure that that is the right decision. It cannot be said too often that I.C.L. will not have a monopoly in the United Kingdom market. I believe that in this industry to talk about the United Kingdom as the relevant market is completely out of date. We are talking about the Western world being the relevant market.

Mr. Lubbock: Not just the Western world.

Mr. Price: It is very difficult for the Monopolies Commission to take into

account competition from behind the Iron Curtain, although we all pay tribute to I.C.T.'s and English Electric's success in Eastern Europe.
I also commend to the House the undertaking that neither English Electric nor Plessey will enjoy a preferential position in the supply of components to I.C.L. and that I.C.L. will be free to seek their supplies from the most competitive sources. That is right. As a shareholder in both companies, I hope that I can ask the Minister to take it from me that in this respect I support what is in the best interests of the economy as a whole.
I turn to Government participation in the venture, which takes two forms— grants up to £13½ million and equity participation up to £3½ million. What of Government grants? On the information available to me, I am in no position to assess the appropriateness of that figure to the future needs of I.C.L. I will return to that when I refer to future development.
Suffice it to say that I regard these grants as a proper form of public support in the special circumstances facing the British computer industry. In particular, I have in mind the scale of I.B.M.'s research and development effort. I know that we can become a little too obsessed with I.B.M., but they are the world market leaders and we have to judge ourselves against them in terms of scale. It does not mean that we must be on quite such a large scale but it is relevant to the threshold level at which research and development activities have a reasonable prospect of coming to commercial fulfilment.
I have received representations, and there were letters in the Press, to the effect that these grants are not as generous as they appear because ultimately the profits made as a result of their effective use will be subject to 42½ per cent, Corporation Tax. That is true, but I do not think that it is a valid criticism. I think that the whole of the £13½ million will be needed as launching aid for the development of the next generation of I.C.L. computers in the 1970s. It is a very important contribution to I.C.L.'s research and development costs. If the next generation of I.C.L. computers are a resounding success, as we all hope they will be, it seems


to me fair enough that the taxpayer should recover 42½ per cent, of his grant. If they are not a success, it will be a question of "loser takes all". In my view, therefore, these criticisms have no validity, but I felt that I ought to mention them because there has been a certain amount of correspondence about them and I understand that these views have also been raised at one or two company annual general meetings.
Next, I must say a little about the Government participation in the company's equity. I cannot put my doubts better or more succinctly than they were put in a leading article in The Times on 22nd March, which read as follows:
What purpose, then can a shareholding serve? A large shareholding confers control, and the duty to manage. The 10 per cent, in I.C.L. cannot do this nor is the Government in a position to provide management expertise if it wanted to. It has difficulty enough in ensuring that its own nationalised industries have a high standard of management. A less-than-controlling shareholding has strategic value: it can block hostile takeovers or simply demonstrate confidence. Neither of these is relevant.
We are left with the profit-making value of the share. The Government maintains, and there is no reason to doubt it, that this will be a profitable investment. But the profits cannot be other than peanuts. They cannot seriously provide a reason for taking a stake in the company.
What is left is the political value of the holding, a demonstration to potential critics that the Government has no intention of allowing private industry to gain all the benefits from its efforts. (Instead, it will gain 90 per cent, of the profits.) On the same argument, the Ministry of Defence should have its stake in every major engineering company in the country; the Ministry of Public Building and Works in the construction, and so on ad absurdum. It cannot be worth the trouble—nor can it be worth tying up the cash.
That seems to put all the main arguments against the Government equity stake.
Even if it is right for the Government to take a modest equity holding in I.C.L. why do they get their £1 at par, whereas Plesseys have to pay £3 a share? I dare say there is a good reason for this, but it is not apparent to a simple soul like myself or to the correspondents of some newspapers. No doubt the Parliamentary Secretary will be able to give us an explanation.
There is one question about the character of the merger. I should like some reassurance—although I may have had it

from the right hon. Gentleman—that this has not been a shotgun marriage. I gather that it has been, at the least, a willing and decent marriage of convenience, but I hope that the Parliamentary Secretary will confirm that.
Looking to the future, an important consideration which was in the minds of the three companies and the Minister when I.C.L. was formed was the development of the next generation British computer system. This is clearly identified in the White Paper which preceded the Order which says:
it is intended to develop for the 1970s a new range of computer systems to be competitive, both technically and commercially, on an international basis.
I commend with approval the last words —"on an international basis". This is clearly the right target, but it will not be easy. Apart from the managerial problems of welding the I.C.T. research and development team with the Electric R. & D. team there is the problem of harmonising for the future the different technical experience of the two systems.
This it not an impossible task, but to the extent that the next generation is based on the experience of the current generation and an extrapolation of that expericence, I can see problems facing for I.C.L.'s management. In view of the enormous strides that have been made in the technological improvement of computers in the last ten years it is probable that the major effort will lie in the development of input-output equipment and the development of all the peripherals rather than in major developments in the central processor.
Furthermore, the data links are likely to prove of increasing importance. That is why we welcome so heartily the participation of Plessey's. Nevertheless, from the commercial point of view the development of software will be every bit as important as improvements in the technical performance of the hardware. This is where I.C.T. has been especially conscientious in its handling of the 1900 series. I cannot speak of System 4 because I have no experience of it. My experience has been entirely with the 1900.
It is essential to keep the development of software in phase with the improvements in the technical performance of the hardware. That raises the question


of the £13½ million grant which is proposed. Am I to assume that this will be directed mainly to the improvement of the new system for the 1970s? Are the Government satisfied that this will be sufficient to see I.C.L. through into the next generation? Also, how does this sort of sum compare with the generality of Federal support in the United States to American computer companies?
I have seen no figures from America that stand up to examination and I wonder whether the Government have any. It would be of assistance to the House in considering this Order. Furthermore, do the Government regard this grant of £13½ million as the limit of their proper support for the next generation of British designed computers? Would they be prepared to give grants of a similar kind, though a lower order, to Computer Technology Ltd., whose small modular computer is not without its attractions.
Furthermore, is the £13½ million grant to be used exclusively for the next generation of commercial computers, or is to be shared in respect of the development of the large machines referred to in the White Paper, which says:
It is also intended to go ahead with the development of a large computer system of such reasonable specification and cost as may be appropriate to meet the orders that Her Majesty's Government intends to place for such a system and other expected demands at home and overseas.
We should like to know a little more about this intention. Presumably, "a large computer system" refers to what are popularly called "super-computers" as the centre of large real-time systems, probably linked to a computer grid. There is undoubtedly a place for such systems in the future. I have seen varying estimates of the probable scale of this market but I have seen no official estimate.
Let me tempt the Government to make one by quoting the best figures that I have been able to obtain, which are, 50 such systems in Britain by the early to mid-1970s and 500 in the whole of Western Europe. Many of these will involve some sort of data communications link. Again, this is the value of Plessey's in this partnership. But it will also involve close co-operation with the Post Office, because of the Post Office's ex-


perience and because it has a monopoly of land lines and micro-wave bands.
I should like to hear from the Government about their hopes and intentions in respect to super-computers. I am concerned about the effect which the work could have on the impetus within I.C.L. of developing its general system of computers for the early 1970s. This may be a quite unjustified fear, and I should like some reassurance from the Parliamentary Secretary about it because, on the record to date, the development of super computers is notoriously speculative. It requires vast quantities of development money, and the market could turn out not to be as large as enthusiasts imagine, or it may develop rather later in the time cycle.
Apart from the considerable technical problems in the hardware field, the software problems are formidable. I.C.L. has a major task in developing its new range of computers and it will need all the money that we are approving in this Order to fulfil that task successfully. In my view, this must be I.C.L.'s major task. It is an open question whether it will have sufficient finance under the Order to develop these super-computers as well, without coming back for more money.
I should feel happier about the intention in respect of super-computers if a separate subsidiary company were formed for the development of the large systems, because such a separate subsidiary within the I.C.L. complex would have separate accounts; it would not have to be carried by the current activities of I.C.L., and it could receive Government grants and loans directly. Another advantage would be that the House could distinguish between public funds going towards the development of the new generation of conventional-sized computers and public money going to the development of super-computer systems.
I see a considerable future for smaller grid systems on a real-time basis, which will not involve very large installations, and they should be within the purview of the next generation of what is now treated as conventional-sized computers.
Will the Minister explain in more detail what the Government have in mind in referring to:
a large computer system of such reasonable specification and cost as may be appropriate



to meet the orders that Her Majesty's Government intend to place"?
What orders do they intend to place? We have not been told.
I am conscious that I have made a rather long intervention in the debate but I hope that it has been a not entirely irrelevant one. I have asked many questions about the background of the Order and the arrangements embodied in it. Some have not been my questions but questions I felt should be asked, because they have been asked in the Press, and in industry, so it would be useful for the record if the Parliamentary Secretary could answer them. I.C.L. is now the only large British computer manufacturer—let us not forget Computer Technology Ltd. in the smaller field— so I wish them every success. Their prosperity in the long run will depend upon their ability to fulfil Emerson's simple injunction:
Let a man build a better mouse-trap than his neighbour and the world will beat a path to his door.
I look forward to the world beating a path to I.C.L.'s door.

1.30 p.m.

Mr. Norman Atkinson: I am very grateful to the hon. Member for Eastleigh (Mr. David Price) for declaring an interest in the traditional way; I notice that he did so as a shareholder, which made even more fascinating some of his later comments. The important thing is that he was speaking on behalf of the Conservative Party, and that is the part of his speech in which I am more interested, although the other facets of the hon. Gentleman's remarks are fascinating.
I, too, have an interest, which I willingly declare, that some of my fellow-workers are employed with the three firms concerned, and I also declare an interest as a Socialist. It is necessary on this occasion to make some comments from a Socialist point of view, and I will do so very briefly.
Returning to the remarks made by the hon. Gentleman, are we to take it that he was speaking officially on behalf of the Conservative Party, and that they, as a political movement in the country, are saying that they have no enthusiasm for the step that has been taken, nor

have they any enthusiasm for opposing it? Are we to say that the Conservative Party is neutral in terms of Government intervention? Can we take that from the comments of the hon. Gentleman, if in fact his speech is an official statement of the policy of the party opposite? It will be interesting to listen to the views of the hon. Member for Orpington (Mr. Lubbock) on the Liberal Party's attitude towards Government participation.
The attitude of Socialists ought to be put on record. Political philosophy has been changing rapidly for some years. From what we have just heard, it is obvious that it is also changing among hon. Members opposite, and that is all to the good. The ideas of the Labour Party on theory and practice are also undergoing a change, and for the majority of the post-war years, many members of the Labour movement, particularly that section which is often described as its Socialist element, have consistently opposed the idea of Government investment in private structure. The interesting thing about the Labour movement and the trade unions is that this idea is now changing rapidly. The majority of Socialist thinkers in the Labour movement overwhelmingly welcome the move that has been announced this morning. We see it is a constructive and progressive way for us to take an increasing part in industry, to extend the influence of the public in the management and direction of British industry and to use public funds for making sure that new technological development brings the maximum benefit for our people. Although this is 10 per cent, democracy, we say that 10 per cent, democracy is better than no democracy at all in the sense of its technological influence. On behalf of the few Socialists whom I know, and many thousands more, I welcome this Measure as a tremendous step forward in the development of Labour Party ideas. We look forward in the future to an extension of the practice of public money being involved directly in developing companies of this sort.
I join the hon. Gentleman in his one enthusiasm, that I.C.L. should look for a European partner. This is tied in with our attitudes on this side to a future concept of British industry linked closely


with European development. We should, now that we have started in this way, go on to look for a partner in Europe, which is the obvious political development. I also like to think that we can go further still and get co-operation from Eastern European countries.
As far back as the 1920 Congress Mr. Krushchev spoke about active participation maybe in mixed economies elsewhere in the world. I think he was referring to the day, perhaps many years ahead, when co-operation will become possible and an Eastern European State and State-organised companies will be able to participate within a structure which contains those elements represented by the hon. Gentleman. I look forward to that day. Whilst our brilliant engineers, scientists, metallurgists and others who have contributed towards our progress have gone ahead, unfortunately our politicians and our commercial structure have dragged their feet lamentably, with the result that our production people have been denied the opportunity of putting into practice the ideas that so often have been born in this country. If this is a way in which we can use commercial resources and public enterprise in order to release the creative ability of our people, then it is something that we should welcome wholeheartedly.
I am rather dismayed to hear that, even though we have a 10 per cent, share in this business, we are not to have any direct representation on the Board.

Mr. Benn: No, my hon. Friend is wrong. We are appointing a director on the Board and the name, I think, has been published, but it seemed right to me, in dealing with the company, that I should deal with the chairman of the company and not deal with the company through the Government director. There is a Government director who will have the same right as other shareholders.

Mr. Atkinson: I am very grateful for the Minister's assurance on that point. There has been some doubt, particularly when he was speaking about the Government's interest in R. & D.
That sums up the political attitude. I hope that developments of this kind will take place in other spheres of industry, development of a "biopolistic" nature—

I hope that our HANSARD reporters can understand this word, which has been used many times and spelt in many different ways. The idea of biopoly is closely related to this matter. The Minister has already referred to the consumer equipment that will be manufactured by the company. If there is a monopoly consumer, the theory of biopoly which is emerging in the Labour movement, as a parallel to the concept of public enterprise and extension in the public sector, ought to be developed.
Socialists will welcome the move, we are interested in this development and sincerely hope there will be many more of the same kind.

1.39 p.m.

Mr. Eric Lubbock: The attempt of the hon. Member for Tottenham (Mr. Atkinson) to make this a political debate was predictable, because we have heard him make before the kind of speech which he has just made. I personally regret it. There is nothing ideological about this scheme.
To answer straightway the question which he posed, may I say I have no objection to public participation in the new company. I should have thought that the hon. Gentleman would have said that the Minister had not gone nearly far enough and that he would like to see the whole of the computer industry nationalised. That, I understand, in the traditional view of a thorough-going Socialist: he wants complete public ownership of all the means of production, distribution and exchange. For the hon. Gentleman to say that he is satisfied with 10·5 per cent, betokens a very healthy alteration in the historic attitude of Socialists.

Mr. Atkinson: It is important that we should get this matter right. I did not say that 10·5 per cent, was adequate or satisfactory; it is not by a long chalk. I said that 10 per cent, democracy was better than none.

Mr. Lubbock: The hon. Gentleman has given a general welcome to the scheme and says that he thinks it will be acceptable to Socialists. I am pointing out that the demands of Socialists seem to have been scaled down a little during the last few years. The hon. Gentleman sometimes speaks in rather extreme terms, and I am delighted to


hear that he has come round to the idea of a mixed economy, which most of us think is a sensible approach to these problems. I have no objection to the Minister having a shareholding in the new company. There are very good arguments in favour of it. There is nothing doctrinal in the solution which the Minister has presented.
May I say how grateful we should be, and how grateful I am, to the Minister for making available this vast mass of documentation—articles of association, briefs, and all the literature which has been sent out by the companies to their shareholders. There was almost too much of it to get through in the short time that we had to prepare for the debate. The right hon. Gentleman has set an excellent precedent. I would encourage him to continue it and, whenever an important scheme of this kind comes before the House, to do as he has done and to present every possible piece of information, bearing in mind the limitations which he mentioned on commercial secrecy and not wishing to give the competitors of this enterprise or any other which might be organised on a similar basis information which might be damaging to our prospects.
I certainly wish, as the hon. Member for Eastleigh (Mr. David Price) said, that we had more information of a non-financial character. I am rather at sea when it comes to A, B and C ordinary shares, although I can understand the reason for the C shares, which are those held by the Government, and why different articles of association should apply to them. If one could be bothered to plough through this vast mass of documentation, one would see logical reasons for having different classes of shareholders. However, I do not wish to go into that matter, because it is not the crux of the debate.
I wish to say in passing—I do not feel very strongly about this point—that it would not have been a bad idea if the public had been able to subscribe directly to shares in the new company instead of merely through the partners in which they might have held some shares prior to the merger. Perhaps it would have caught the imagination of the investing public if they had been able to subscribe directly to the ordinary capital of the new com-

pany. It may have been a very long-range investment, but we do not expect a pay-off in the immediate future. I believe that many people would have liked a small stake in this very exciting technology, not through Plessey or I.C.T., but directly in I.C. (Holdings) Limited. With my small amount of money to invest, I should have liked to be able to do that just as an earnest of my support for this developing technology, and not particularly because of any profits which I should hope to make, although, when we develop this new range of computers, very substantial rewards could result in the 1970s.

Mr. J. H. Osborn: Does the hon. Gentleman see any objection to I.C. Holdings putting out a further equity issue in future so that the public can subscribe? I see no reason why that should not happen. I do not know whether that is the hon. Gentleman's view.

Mr. Lubbock: I think that it might well happen. As the hon. Member for Eastleigh said, when it comes to the development of this very large computer, even more money than the resources of the company may be needed, with the participation of the three partners and the £13½ million subscribed by the Government. Therefore, if in a few years they require more money, I hope that the directors will consider my suggestion and that the Minister will give his personal encouragement to it as a means of enabling the ordinary shareholding public to take a direct interest in the new venture.
That is all that I want to say about the financial arrangements. I do not think that that is the really important point. What we should be considering is the future of the computer industry from many of the points of view with which the hon. Member for Eastleigh dealt. For example, do we wish to sustain artificially a British computer industry, whatever it may mean, compared with our United States competitors, because they are the only important ones? It must be underlined again that this is not by any means a monopoly. Not only I.B.M. but Honeywell is very active in the United Kingdom.

Mr. David Price: And Burroughs and N.C.R.

Mr. Lubbock: Yes. A number of the United States computer giants are doing extremely well in the United Kingdom. There is no question under this scheme of enabling the sole British computer company to run away with all the orders.
Sometimes I have wondered whether the Government should adopt a slightly more favourable policy towards British computers. I do not say that they should introduce American or similar legislation which requires foreign suppliers to beat the British price by a certain percentage, but by their purchasing power, through the nationalised industries particularly, they should place large orders for certain types of computer and try to persuade the users, such as the gas boards and electricity boards, to develop common programmes which will enable them to place bulk orders.
Some time ago, I think last summer, one of the colleagues of the hon. Member for Eastleigh tabled a Question about the number of computers and their types and the jobs which they were to be given in the nationalised industries in Government Departments. The variety was quite frightening, because it indicated that there had been no harmonisation of the requirements between the various nationalised industries in Government Departments. For example, in the gas boards, where the job must be fundamentally the same as it involves invoicing, stock control, and so on, which I should not have thought varied very greatly from one area of the country to another, about a dozen different types of computer had been introduced. No doubt this meant in every case separate expenditure on the "software" which could have been avoided if, by central machinery, the Government could have ensured that, in so far as these organisations were performing the same functions, bulk orders were placed for the same type of computer.
This is a means whereby the Government's purchasing power can be used very greatly to the benefit of our home industry. I am not saying that we should never seek quotations from American firms operating in this country in full and fair competition. However, by enabling orders to be placed in bulk, we might have assisted these companies to obtain a fair share of the market, which

is essential if they are to sustain the growing research and development expenditure.
I agreed very much with what the hon. Member for Eastleigh said about the size of the market being of the greatest importance. He pointed out that unit costs were critically dependent on the size of the market, although I am not sure that I would agree with his comparison with the aircraft industry. In the one case in the Plowden Report from which the hon. Gentleman quoted, it was clear that we could not develop very large military projects on our own and that in future we should have to work through co-operation with our allies concerning the very large sums of money involved in developing new military projects. It is not clear to me that that should be so in the case of computers. This is still within the bounds of our resources, and, although European groupings are desirable, they are not a sine qua non for the maintenance of the British computer industry.
I am grateful to the Minister for what he said in reply to my intervention. I only wanted to get this on the record, because people have written to me saying that this merger might jeopardise the chances of a wider European grouping. I have said that I myself do not believe this but it is a strongly held opinion which needs to be refuted. European companies would much rather co-operate with a really strong British organisation which is capable of standing up to the American giants than they would with a fragmented industry in Britain. If there had not been this merger, the tendency would have been for more and more European companies to enter into arrangements with the United States. We have already seen what has happened in France, and the process would have been extended still further.
I agree with the hon. Member for Tottenham that we should not confine our thinking to Western Europe. The Eastern European markets for our computers are very important. English Electric and I.C.T. are to be heartily congratulated on the work they have already put in in those markets. If we continue as we have been, we could obtain such a hold in the Eastern European markets that it would be very difficult for the Americans to break in and


compete with us, just as we find it very difficult to compete with them in the markets where they have been in sole possession for so long.
This might well entail some kind of joint arrangement between the new computer company and its opposite numbers in Eastern Europe. This will obviously present great difficulties, because of the differences in our company law, methods of taxation, and so on. However, it is not too early to begin considering such a thing in conjunction with the countries where such a substantial number of British computers have already been sold. I would certainly welcome any thinking that the Minister can do on this subject.
I welcome this merger. I very much hope that it will lead to a marvellous future for those working in the combined operations. If I was starting my career again in engineering, I think that I would go into the computer industry, because I think that the possibilities there are more immense and more exciting than they are in practically any other field of advancing technology. Therefore, I wish the workers and the participants in all three companies the very best of success in the future, expanding markets all over the world, and the best of luck in competing with their American rivals.

1.52 p.m.

Mr. John H. Osborn: The Minister referred to increasing collaboration between Government and industry. I have spoken on this subject many times. In what has happened now, the marriage laws, as it were, have changed: we have new marriage laws. Perhaps this is the first practical example of marriage between Socialism and capitalism under the new laws which Parliament has created. I might call it a shotgun marriage, but I should be conflicting with my hon. Friend the Member for Eastleigh (Mr. David Price) if I did. I would qualify this remark by saying that the partners have been very willing. I hope that this will be a happy marriage.
The hon. Member for Tottenham (Mr. Atkinson) brought in a political issue— I think fairly and rightly so, but we have to determine which partner is to wear the trousers. Our history will reveal this. This is the first example of Government

participation under the Industrial Expansion Act.

Mr. Lubbock: It is polygamy.

Mr. Osborn: That creates another problem. I am at a slight disadvantage in that I did not take part in the proceedings in Committee on the Industrial Expansion Bill. I have listened to this debate, particularly to the Minister's explanation, with interest. As I listened I felt, as I have said in previous debates, that I as a back bencher am fulfilling therôleof trustee for the taxpayer. I have even doubted of my competence to comment on this very complex Measure. But I would claim that my qualification for making comment are greater than these of many hon. Members.
The Minister presented his case very well in the form of what was almost a Second Reading speech. The country will be grateful to him for explaining to the House his case and the history of events which have led up to the White Paper and the Order. I wonder whether it will be right, if we have such orders in future, for a Minister to involve himself in so much detail, but the fact remains that the Minister has made the House and the country aware of the detail and the background information. For this we are grateful.

Mr. R. F. H. Dobson: Surely the hon. Gentleman is not suggesting that my right hon. Friend should not give the fullest possible details, as he has done in this case, to Members of the House?

Mr. Osborn: Perhaps the hon. Gentleman will allow me to continue my argument. If I do not elaborate on this, I hope that he will interrupt me again. My reactions have been mixed throughout. I opposed the Industrial Expansion Bill. The Minister knows that I would continue to oppose excessive, unwarranted interventionism by Government in this field.
The conditions are changing as a result of a series of decisions taken by the Government. I would be the first to admit that rationalisation is essential, not only in this field, but in many others. This is very important for those involved in the industry. This concept is embodied in the Order. It is a complex Statutory Instrument. I took the liberty


of discussing this with one or two people in banking who are used to bringing industrial organisations together. By and large there has been no criticism, and some measure of support for this Order from all the conventional circles which I have approached. It is an important rationalisation exercise. An industry— certainly not the computer industry— cannot be allowed to be broken up into small components.
If the Order has been presented to us in an orthodox manner. My main reservation is concerned with the extent to which the Government should go on intervening. I have had the opportunity in the last few weeks of witnessing the extremes in the Soviet Union. If the Government are to have the opportunity of intervening by means of a number of agencies—the Industrial Reorganisation Corporation; the powers of the Minister under the Industrial Expansion Act, for example—Parliament must ask for a full explanation of that intervention. I do not say that I am criticising the Minister for coming here. I am not. I welcome the fact. There must be a continuing accountability for intervention of this type.
This amalgamation is complex by all standards. I sometimes wonder whether Parliament is the right institution for answering the accuracy of the judgments which have been taken. Should Parliament be brought into this? The Minister has consistently wanted to involve Parliament in a relationship between Government and industry. This is now involving Parliament in more and more work in which it is not competent to operate.
This is the major reservation that I have had, because a study of this type requires deliberations by many people, and in the past this sort of work has been devolved from Parliament and not placed on Parliament. I therefore regard this increasing involvement as likely to prove to be a retrograde step, because it involves Parliament in more and more complex issues on which it is hard to give a judgment.
I turn to some of the details. We have the White Paper. In 1972–74 £8 million worth of English Electric Loan Stock at 7 per cent, will be converted into ordinary shares at the rate of one ordinary share for £4 of loan stock.
I just raise my eyebrows at that. Perhaps the Parliamentary Secretary will give a fuller explanation of the accounting.
The Ministry of Technology is to pay £3,500,000 for C shares, 2s. in the near future and 18s. in September, 1972. This seems a rather unusual arrangement and, no doubt, it is closely tied up with the grant. Perhaps the hon. Gentleman would elaborate on the reasoning behind it. My hon. Friend the Member for Eastleigh has already raised the point that Plessey will be paying 60s. for its £1 shares, 6 million of them. Again, this is anomaly on which one would like further explanation.
I welcome some of the assurances in the White Paper. In paragraph 5 we are told that,
The Minister will not use his shareholding to intervene in any way in day-to-day management, and neither English Electric nor Plessey will enjoy a preferential position in the supply of components".
That is a welcome assurance, and I know that it will be welcomed outside. We have already touched on the future development programme and the need for another generation of large computers. This also is dealt with on page 2, and I welcome the trend referred to there.
My own conclusion is that, if the parties to this agreement are satisfied with it, as they plainly are, it is difficult for Parliament or others outside the negotiations to comment adversely in an informed manner. In spite of the information which the Minister has made available, we have not taken part in the detailed negotiations, and as I know from my own experience in other fields that it is impossible for outside observers to offer a reasoned opinion on the matter.
My next question—this may not be the place to have an answer—is to ask to what extent the Government have become involved in the computer industry. The Minister outlined what had been done regarding the N.R.D.C., the £5 million loan of which £4 million has been taken up. I was astounded to read the comment of the Comptroller and Auditor-General on page 68 of the Report and Accounts of the N.R.D.C. for 1966–67. This may well not have escaped the Minister's notice. The


Comptroller and Auditor-General, referring to this agreement, said that it
appeared to me unusual in a number of respects: first, as representing much the largest and most important operation which the Corporation have so far undertaken; second, as providing financial support not for the development and exploitation of specific inventions but for a general programme of research and development falling within the normal course of business … third, as providing for a large proportion of the Corporation's financial support (£1 million out of £5 million) to be given in respect of work already carried out … ".
He refers to the return of the Corporation in paragraph 12:
… the Corporation will receive a specified share of the trading surpluses earned by the company and its subsidiaries.
There is a new relationship here between the N.R.D.C. and I.C.L. I presume that this position has been assured. The Parliamentary Secretary may say that, if I look at one of the documents, I shall find it fully covered, but I raise the question now.
Next, what about therôleof the Industrial Reorganisation Corporation? In his full explanation, the Minister hardly referred to the Industrial Reorganisation Corporation at all, but I take it from certain Press comment that it was a major catalyst during the early stages of this venture.

Mr. Benn: There were discussions with the I.R.C. at different times, but, as I tried to explain in my speech, the more we thought about it the less it became a financial merger and the more it became a technical merger and one for which the I.R.C. was not in a position to provide research and development grants of the kind which became central to the scheme. Thus, although always ready and available, the I.R.C. was not involved in the final arrangements for the meger. However, I made a special reference to therôleof the I.R.C. in relation to English Electric and Elliott. That was an I.R.C. operation and we knew about it as it went through.

Mr. Osborn: I thank the Minister for that intervention. We shall have to see how he uses his powers under the Industrial Expansion Act in relation to the I.R.C.
The right hon. Gentleman mentioned the English Electric-Elliott Automation

arrangement and the £15 million. This is referred to in the Annual Report of the I.R.C. It would be useful to have a fuller explanation of how English Electric has spread itself out into data processing and, shall we say, automation and navigation control instruments. This is a double split affecting English Electric, and it is an interesting development. Plainly, a wide range of computer activities remain outside International Computers (Holdings) Ltd.
Coming back to the fundamentals, how are we to judge whether the Government and those representing the industry have made the right decision? We have talked about internationalism in the computer market, and we have talked about European technology, but to put it at its extreme—I do not think that the Minister implied this—we do not want a national inward-looking computer industry. This would be fatal, and the Minister ought never to find himself in the position of defending it.
The computer industry is very much an industry which demands large-scale operation. I have had it said to me, and I think it is about right, that I.B.M. is spending on research and development alone roughly the turnover of I.C.L. So by international standards I.C.L. is still by no means a giant. Scale is essential.
I echo the hope already expressed that the present step will provide a base for international operations. The Minister himself spoke of £25 million exports by the new combination. Only large-scale international operation will justify the Government's shareholding at the end of the day.
There is, however, a new situation here in that the Government are providing through agencies more generous and better terms than the market. This financing would have been impossible without Government backing. It creates a precedent, and we shall have to take other opportunities to discuss it. Money on preferential terms is being made available not only through the Industrial Reorganisation Corporation but under the Minister's powers under the Industrial Expansion Act, and industrialists will be queuing up, as it were, for these special terms. I hope that there will not be a scramble, because that would create a complex situation for Parliament. However, there will be other occasions to


pursue this question, as it will create an undesirable situation.
I share the Minister's view that the computer industry needs priority. It is essential that we encourage would-be users, and especially our own industries, to use computers. But technological development calls for risk-taking. The Minister must admit that he has on behalf of the taxpayer taken a risk here. Someone must take the risk, and he has done so. This step, therefore, is a new departure. Now that he has taken it, I welcome what the right hon. Gentleman has done and wish the project well.
But for some of the comments of the hon. Member for Tottenham, I should have ended my speech there. The hon. Gentleman elaborated on the merits and demerits of Government participation in activities of this kind. We have been committed to a mixed economy for some time, and the result of the present merger will be to make the economy still more mixed. The hon. Gentleman spoke of industry dragging its feet in computers and in other fields. What happens if, in five, 10 or even 15 years, the Minister finds that the new company is dragging its feet? How does the Minister visualise that he or his successors will be able to do something about it? Will he try to take out the State's money, in which case the industry will almost certainly sink? Will he sell it off?
I should like to contemplate this type of intervenion being but temporary—to put an old industry on its feet again, in other instances, or, in this example, giving a push to a new industry—and then withdrawing the funds and using them again. This has essentially been one of the many functions of a merchant bank over the years. I hope that this will not lead to growing participation in management. It is something that in the White Paper the Minister assured us would not happen.
But at this point of time to be specific I wish to project every success and thank the Minister for making such details available to the House and the country.

2.11 p.m.

The Joint Parliamentary Secretary to the Ministry of Technology (Dr. Jeremy Bray): Few new Acts, and few new first

Orders under Acts, can have had a more general welcome in their application than the Order has had from both sides of the House, from people representing a very wide spectrum of political views and experience of industry.
I am very grateful for the recognition of my right hon. Friend's action in making information available to the House. He constantly stressed during the passage of the Industrial Expansion Act that this would be done, and we mean to carry on in the same way in future.
A number of detailed questions have been asked which I shall answer as fully as I can. I rather suspect that the House will take a continuing interest in this matter over the years and that many questions will be asked as experience is gained as we go along.
The hon. Member for Eastleigh (Mr. David Price) asked how Government policy on procurement will be affected by the merger. He pointed out that the merger will not constitute a monopoly. The policy of the Government towards the purchase of computers will continue as before. We shall try to purchase computers made in Britain, whether by British firms or the British subsidiaries of foreign firms.
The hon. Gentleman said that this is not a simple matter, and I could not agree more. He added that he thinks that a precise formula is not appropriate, and here too I agree with him. First, there is the problem of the criterion of merit in relation to proposals made to meet a particular application. There are the questions of price, which is very important, performance, delivery date, success in achieving prompt delivery, efficient performance on previous orders, the character of existing equipment installed, and so on.
On the definition of what is a British computer, there is the criterion of the ownership of the company, which is certainly relevant, and the questions of where the design was carried out and the proportion of components of the total system, of the value added of the actual hardware, which represents work in this country.
I read with interest Rex Malik's article to which the hon. Gentleman referred. Mr. Malik is, as he should be,


a robust journalist. He made a number of observations in the article about the practice of computer companies and their customers as well as of the Government. I slightly dissent from his suggestion that there is any very obvious alternative method of proceeding to that which the Government have now adopted. Mr. Malik suggested opening the tenders in the presence of all who have submitted them, but I do not think that even he felt that this really dealt with the complexity of the problem. A very important part of handling the problem is for the Government to keep in close touch not only with the I.C.L. but other computer companies selling and operating in this country.
I do not agree that more ill-feeling is generated in public procurement of computers than procurement elsewhere. Computers form a very emotional subject, and many senior executives in many organisations get very worked up about them. The companies make very robust remarks about each other's behaviour, and the attitude of executives in particular customer companies. It is said by some companies that senior men in certain companies owe their position to other computer companies, and that this is a factor influencing the choice of computers.
There has been a great deal of friction in some major computer users in the private sector on the question of standardisation of the use of computers by that particular private organisation. The advantages of standardisation on the use of a particular make of computer in a particular organisation cannot be achieved without a certain amount of friction within the organisation. This is no doubt as true of the public sector as it is of the private sector. In certain private organisations there have been staff resignations on a large scale, which I do not think have occurred anywhere in the public sector.
We keep in close touch with the overseas computer companies operating in Britain. We have been giving encouragement to their expansion, particularly of new manufacturing establishments in this country, and we shall continue to do so.
I was asked why there were four classes of share in the merger. Different rights attach to the shares which

will initially be assigned to the different shareholders, particularly in relation to the deferment of dividends in the initial period. The sensible way to deal with this is by different classes of shares.
The hon. Gentleman quoted The Times leader of 22nd March, which suggested that the profits which might accrue to the Government were peanuts and therefore of no conceivable relevance to whether or not the Government held shares. I find that argument quite extraordinary. The advice and agreement of the financial advisers is that the Government, recognising the character of their interest, are getting a fair return on the contribution they are making to the merger. If the profits are peanuts it should rather be a commendation that the Government are achieving so much with such a relatively slight commitment of resources, as some people may feel it to be. I do not think that the criticism that the size of the profits discredits the relevance of profits for taking a shareholding stands up to examination.
The hon. Gentleman asked why English Electric shareholders should be given 31st December, 1967, as the transfer date. That was the date of the valuation of the English Electric assets which was used for the purposes of negotiations.
Both the hon. Gentleman and the hon. Member for Sheffield Hallam (Mr. J. H. Osborn) asked how the N.R.D.C. interest in I.C.T. will be unscrambled. Certainly, the effect on the cash flow is very much in mind in the negotiations which are proceeding on this between the N.R.D.C. and the I.C.L. at present. We have no reason to believe that there will be any difficulty in finding a satisfactory solution. The hope is that the N.R.D.C. investment will be repaid rather more rapidly than had previously been supposed.

Mr. J. H. Osborn: I referred to the fact that the Comptroller and Auditor-General had made some comments on the position in the N.R.D.C. Is that satisfactorily resolved now?

Dr. Bray: I should like to look at the details of the hon. Gentleman's point. As far as I am aware, there are no difficulties about this in the current negotiations between the N.R.D.C. and I.C.L., but I shall write to the hon. Gentleman.
On the question of why Plessey should have to pay 60s. for the shares whereas the Government seem to get them for 2s. until 1972, when they have to pay the further 18s., this is part of the total package One has to look at the inflow and outflow of money, evaluate it in the event of private successes on the part of the company, and then overall assess the contribution that different people are making. This was a complex quad-rupartite negotiation, and the fact that it led to general agreement is a great tribute to the skill of the financial advisers of the companies and the officials who conducted the negotiations. The price of the shares to the Government is, of course, a recognition of the research and development grants which the Government are making.
The hon. Member asked for a denial that it was a shotgun marriage. This is an important question. It was neither a shotgun marriage in relation to the views of the boards, nor a shotgun marriage in relation to the staff of the companies. Of necessity from the nature of the relations between Mintech and the companies, we have contacts with a wide range of different levels of staff in the companies as well as in their customers. There are few industrial questions on which we have found wider agreement than the merits of the proposed merger which has now been completed.
I attach the greatest weight to the opinion of those individuals who do not stand to gain personally from the merger, who have played a very distinguished part in the history of the computer industry and who, despite any prejudice to their future careers, will now say firmly that this is the right solution.
The hon. Member asked whether the money will be sufficient to cover software development as well as hardware development. This was certainly taken into consideration in fixing the size of the research and development grant.
The hon. Gentleman also asked for a comparison between the size of the United Sta:es support and that of British Government support for the computer industry. He will recognise the great difficulty of getting any kind of comparable figures. I cannot venture any estimate of the size of U.S. Government support. However, I have got the figure

for the total of Government expenditure in support of the computer industry since the year dot for this country. I think hon. Members will be surprised to learn that this has been only £11·6 million— since the earliest days of computers, the late 1940s.

Mr. David Price: Before this Order?

Dr. Bray: Yes, before this Order. This is up to the present.
It is in one sense a sign perhaps of lack of appreciation of the importance of computers on the part of previous British Governments. On the other hand, it is a real tribute to the effectiveness of public investment and to the achievements of the pioneers of the computer industry in making such good use of that support in building up what is now a strong, growing and potentially very powerful industry.
The hon. Member was right to point out that the scale of support now needs to shift on to a different level. That has been the policy of the present Government over the past three and a half years. It is now moving on to the next stage in execution.
I was also asked about support for other firms. The advanced computer technology project continues, and there will indeed be activities in the computer field which will warrant public support, and also in the computer applications field.
Various hon. Members asked about large machine plans. Undoubtedly there is a Government requirement for a number of large computers for use in administrative data processing, and there is also a requirement for large computers in research and the activities financed by the board of the computer company. This is a requirement which has been under consideration by the computer companies for some time, and I.C.L. is giving it its most urgent attention to ascertain how the requirement can best be met. The suggestion that large computers might be hived off and made the subject of development by a separate company is an interesting one, but I am sure that the hon. Member who made it will not expect a reply today of the cuff.
On the importance of communications in the development of large and not-so-large computers, the contribution that


Plessey can make to this has been recognised by everyone who has spoken. I am glad that the hon. Member for Eastleigh referred to the contribution that the Post Office can make. It is perhaps of interest that the head of the long-range planning group in the Post Office is the man who used to look after computers for the Treasury, and that the director of the National Data Processing Service is the former head of the computer division in the Ministry of Technology. So there will be close and continuing contacts with the communications industry about the development of computers in future.
There was just one reservation in the speech by the hon. Member for Eastleigh in his judgment of the merits of the case. He properly made the reservation that he did not have the full information which as a business man participant in the deal he would get. But he also made a slight reservation about the general pattern of the merger, as to whether it should have been first with European companies before bringing the British industry together. I think that the information is available to him to enable him to arrive at a judgment on this question. If he reflects on it, to have formed a merger between separate British companies and separate European companies would, in effect, have made the United Kingdom the cockpit in which the major computer companies of the world would have fought it out. This no doubt would have been enormous fun for the computer companies, but it would have been sheer hell for the computer users, who would have been faced with incompatible systems, divergent courses of development and the greatest uncertainty in the planning of their future development over the years.
The convenience of the users and the sheer logic of the market was the overwhelming consideration not only in the mind of the Government in seeking this merger but also in the decision of the separate computer companies themselves to seek the merger, for they felt that it was the logic of the market that drove them together, and this was clearly the motive which led their technical experts to seek hard and successfully the techni-

cal solution to their future development plans.

Mr. J. H. Osborn: Is it not true that I.C.L. will be far from having a monopoly? The hon. Gentleman said that there will be outside systems and computers which will be welcome in the British markets. I do not see the logic of his argument.

Dr. Bray: If the hon. Member tots up the shares in the United Kingdom computer market which would have been held by different computer systems if there had been two British major computer companies and compares them with what will now take place, he will see that there will now be much more commonalty in use between customers than would otherwise have been the case.
I think that we are all completely agreed that the future market does not lie solely in this country; and that if we are to market more widely we must also form wider associations of some kind between manufacturers. We have made this view prefectly clear to the computer companies—who, indeed, needed no encouragement at all in that direction—and I think that we can certainly look forward to I.C.L. pursuing a throughly open attitude and policy towards forming links of whatever may be the appropriate kind—and one would obviously not wish to prejudice that at this stage—with manufacturers in Europe and in the United States, too. We do not wish to cut ourselves off from United States technology nor from the applicants' know-how which will be important in the United States and in Europe and in Eastern Europe as well.
I think that I have dealt with most of the points that have been raised but, as hon. Members recognise full well, this is a matter of continuing Parliamentary interest and we shall be very happy to notify the House of progress in the years ahead in the success of this company which is now formed. It is therefore with some confidence that I ask the House to approve the scheme now before us.

Question put and agreed to.

Ordered,
That the Computers Merger Scheme 1968, a draft of which was laid before this House on 11th June, be approved.

Orders of the Day — CINEMATOGRAPH FILMS (LEVY)

2.34 p.m.

The Parliamentary Secretary to the Board of Trade (Mrs. Gwyneth Dun-woody): I beg to move,
That the Cinematograph Films (Collection of Levy) Regulations 1968, a draft of which was laid before this House on 12th June, be approver.
It may be for the convenience of the House, Mr. Speaker, if with these Regulations we take the Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations.

Mr. Speaker: If that is the wish of the House, so be it.

Mrs. Dunwoody: These regulations are made by virtue of the Cinematograph Films Act, 1957, which provides for the imposition of a levy on exhibitors of films, the proceeds of which are to be used for the benefit of makers of British films. The Board of Trade is required by Section 2 of the Act to make Regulations prescribing the rate and method of collection of the levy, and by Section 3 to make: regulations governing its distribution. Before making Regulations under either of these Sections the Board must consult the Cinematograph Films Council, and such Regulations may not be made until a draft has been laid before Parliament and approved by each House of Parliament.
I will take, first, the draft Collection of Levy Regulations. It may assist if I begin by describing the present method of assessment and rate of levy. The amount of levy payable by exhibitors depends on their box office takings. The first l1d. of each admission charge is free of levy. The present rate of levy is one-ninth of the amount by which each admission charge exceeds l1d. The levy is collected on a four-weekly basis by Her Majesty's Customs & Excise, by whom it is handed over to the British Film Fund Agency, a statutory body set up under the 1957 Act.
That Act requires that in determining the rate of levy, the Board of Trade shall have regard to the prevailing economic circumstances of both exhibitors and makers of British films, as well as the prevailing level of production of such

films. Thus, the Board has to keep the situation under constant review and to strike a balance between the needs of the producers and those of the exhibitors. The purpose of the levy is to assist production of British films, but this purpose must be achieved without imposing an undue burden on the exhibitors.
The prosperity of producers no less than that of exhibitors depends on the level of attendances at the cinemas. People no longer go to the cinema as a habit nor, I am glad to say, do they need to go to keep out of the cold, as they often did in the thirties. In order to attract audiences, the industry must produce films that are worth seeing, and they must be shown in pleasant surroundings. It is no use producing films unless there is a reasonable expectation that there are sufficient cinemas, and sufficiently attractive cinemas, at which they can be shown.
The levy brings immediate financial gain to the producers, and is undoubtedly a powerful stimulant to production. But it is a stimulant which, like many others, must be taken in reasonable quantities if it is not to have harmful effect. The 1957 Act recognises the danger of excess either way in that it requires the Board of Trade to fix the rate of levy so that the yield will, in the Board's estimation, be not more than £5 million and not less than £2 million.
The rate of levy has remained unchanged, one-ninth of the amount by which payment for admission exceeds 11d., since 1960. It will, I think, assist the House if I give some figures relating to the industry at that time and at the present.
First, let us look at production. In 1960, 79 British long films were registered, and 77 in 1961, since when the level has remained constant, around the 70 mark. Production this year, 1968, is again running at a high level. When we remember that attendances at the cinema fell from 501 million in 1960 to 265 million in 1967 I think that we can say that the level of production has kept up remarkably well. The yield of the levy was £3·9 million in the year ending in October, 1960, it remained at more or less this figure annually until 1963, and then rose to £4·6 million in 1965. In 1967, it fell back slightly to £4·5 million. We would all, I think, agree that the maintenance of the level of feature film production has


been greatly assisted by the operation of the levy arrangements.
At present, the studios are busy. There is no unemployment in the industry, and I believe that activity continues at an exceptionally high level. A high proportion of the investment in film production in this country is made by the British subsidiaries of the big American companies, and this, I know, gives rise to anxiety. But, whatever the future may hold, it cannot be denied that at the present time this country is one of the busiest centres of film production in the world. Production is attracted here not only by the levy but also, and I think more so, by the wealth of artistic talent and technical skill in this country and by the excellent studio facilities which we can offer.
The exhibition side presents a very different picture. The number of cinemas licensed fell by nearly half from over 3,000 in 1960 to 1,772 in 1967. The decline has not yet been arrested. In the past three years closures have averaged more than 100 a year. As I mentioned earlier, attendances in 1967, at 265 million, were little over half of what they were in 1960.
Of course, there are many causes contributing to this decline. The advent of television has led to a spectacular fall in the level of cinema attendances, not only in this country but throughout the world. In 1960, there were 10·5 million current television receiving licences: by January of this year, the figure had increased to 15 million. We now have the added attraction of colour television. But as well as this, the general rise in living standards has meant that many more leisure time activities are available and accessible to the public, and the cinema must fight hard to retain its audience.
It would accordingly be foolish to argue that the burden of the levy has been a major factor in the closure of cinemas. But it would be equally foolish to assert that it has had no effect whatsoever. In order to meet competition from rival attractions, cinemas must modernise and re-equip so that films can be seen in comfort. This needs money, and the levy is a direct drain on the exhibitors' resources. Many cinemas operate on narrow margins and, though

there are provisions for relief for cinemas with very low takings, it is possible and indeed likely that in some cases the burden of the levy makes the difference between a decision to close a cinema and one to keep going and hope for better times.
An important consideration is the fact that the average price for admission to the cinema has increased substantially since 1960, when the present rate of levy was fixed. It is of course reasonable that when the price of a seat at the cinema is raised, the levy contribution should go up also. But, because there has been no increase since 1960 in the exempt portion, the l1d. to which I referred, the incidence of the levy has grown steadily. In 1960 it amounted to about 6 per cent, of box office receipts. It is now about 8 per cent,
I think that it is important to retain the arrangement whereby a part of the admission price is free from levy altogether. The original purpose of this device was, of course, to reduce the burden on the lowest priced seats, and this will continue to be our aim.
My right hon. Friend the President of the Board of Trade and I are satisfied that the time has come to afford some relief to the exhibition side of the industry. We are well aware that a reduction in the yield of the levy will not find favour with the producers. But there must be a sharing of burden and in our view the Cinematograph Exhibitors' Association and the Association of Independent Cinemas have made out a convincing case. The Cinematograph Films Council, on which all sides of the industry are represented, which has been consulted as required by the Statute, has recommended that the exempt portion of each seat price should be increased from l1d. to 1s. 6d. The exhibitors' associations had asked for the figure to be increased to 1s. l0d. We are not likely to get unanimity on any figure, and the recommendation of the Cinematograph Films Council seems to me to be a sensible compromise.
It is, of course, not possible to give a firm figure for the effect of proposed change on levy yield. The amount raised by the levy depends on the level of seat prices and the number of people who attend the cinema. In view of their need to attract as many people as possible


to the cinemas, I have no doubt that exhibitors will appreciate the importance of taking all possible steps to avoid price increases. But, even so, the size of their audiences will depend on the success of the producers in gauging public taste, on the quality of the rival attractions on television, and, last but not least, on the weather. These are matters on which conjecture is hazardous. But on the basis of past receipts, it seems that the proposed increase by 7d. in the exempt portion of admission prices may be expected to reduce levy yield by about £600,000 to £700,000 in a full levy year.
I have dealt at some length with this question, and I have given it prominence because the proposed change, embodied in draft Regulation 3(1) is by far the most important of the amendments which the House is invited to approve. I will now deal, and deal more briefly, with the draft Regulations as a whole.
The Regulations in force at present were first made in 1960, since when there have been five amending regulations. The opportunity has been taken to consolidate the regulations into one Statutory Instrument. Except in regard to the matters to which I shall draw the attention of hon. Members, the draft Regulations repeat the provisions of the Regulations currently in operation.
There is nothing new in Regulations 1 and 2. I have already explained the reason for Regulation 3(1), which increases from l1d. to 1s. 6d. the exempt portion of admission payments.
Regulation 3(2) introduces an additional form of relief intended to help exhibitors with widely varying box-office takings, for example, those at seaside resorts. At present, an exhibitor is exempt from levy in any week in which his takings do not exceed £400. This provision will remain in operation. But new Regulation 3(2)(b)(ii) provides in addition that an exhibitor will pay no levy when the average of his takings in the weeks in which he has shown films during the levy year does not exceed £400. The effect of this concession on levy yield will be small, but its effect in helping to keep open seaside cinemas may be considerable.
At present, levy must be paid within five days after the end of each con-

secutive period of four weeks in respect of which it is payable. Regulation 4 makes things a little easier for the exhibitor by increasing this time of grace from five to 10 days.
The only provision in the old Regulations omitted from the new is that which provided an alternative method of calculating levy. It limited an exhibitor's liability to the level of levy plus Entertainments Duty chargeable in 1960. Entertainments Duty was abolished in the same year. This provision, which has apparently never been invoked, is now an anachronism, and it has accordingly been dropped.
This is the full extent of the proposed changes. I believe that they are in the best interests of the industry as a whole and I commend them to the House.
I now turn to the Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations. The Distribution of Levy Regulations provide, as their name implies, for the sharing out among producers of eligible British films, of the proceeds of the levy. Levy is paid in proportion to films' rental earnings, and, as I explained earlier, payments are made by the British Film Fund Agency, a statutory body to which Her Majesty's Customs, after deduction of expenses of collection, hand over the levy proceeds.
The amendments which are now proposed are five in number. The first of these concerns newsreels. Under the existing regulations, the earnings of short films are multiplied by 2½ for the purposes of calculating their levy entitlement, and the earnings of newsreels are multiplied by two. At one time, a news-reel formed part of every cinema programme, but the greater immediacy of television has in recent years gone a long way towards pushing the newsreel off the screen. But although I understand that newsreels have now disappeared completely from the cinemas in America, two British newsreels continue to be shown at cinemas in this country; and not only in this country.
Throughout the world, newsreels play a part in projecting the British way of life and in proclaiming British achievements. There are extensive arrangements for exchange of material with foreign newsreel companies, and the British news-reel companies produce weekly newsreels


for the Central Office of Information. In these ways about 70 countries throughout the world regularly see British newsreels. This is an important "shop window" for Britain.
I think that the newsreel companies deserve some measure of encouragement. The average life of each issue of a news-reel amounts to only four three-day bookings, each print having an average of four runs during its two-week life. It can expect to earn rentals, and so levy, only during this short period.
My right hon. Friend consulted the Cinematograph Films Council on this question and the Council recommended that the earnings of newsreels should be multiplied by 2½, instead of by two as at present, for the purposes of calculation of levy earnings. The extra amount which will thereby be earned by the two surviving newsreel companies will not be large. I cannot disclose figures without running the risk of revealing details of company earnings from the levy. But I can assure the House that the effect of the change, though of real value to the newsreel companies, will in relation to payments from the levy taken as a whole be small.
The second change concerns "low cost films". At present, a "low cost film" is, for levy purposes, defined as a long film the labour costs of which do not exceed £20,000. Levy is payable in respect of such films at two and a half times the standard rate until their rental earnings reach £15,000 or their labour costs, whichever is the lower. On earnings above the limit levy is paid at the standard rate. The amendment in the new regulations increases the first of these figures from £20,000 to £25,000 and the second from £15,000 to £18,750. These increases afford some recognition of cost increases in recent years and at the same time impose the need for efficiency and economy on the producer who wishes to qualify for the higher rate of earning.
The third change affects the eligibility for levy earnings of non-standard films, for example 70 mm. films. The intention has always been that the levy-earning life of such films should be the same as that of British quota films, which is prescribed in the present Regulation 6(3)(a). The new Regulations provided a redraft of the present Regulation 6(3)(b), which

will remove any doubt or obscurity there may have been in the earlier wording.
The fourth change concerns the use of derivative material. Section 20(3) of the Films Act, 1960, provides that where parts of a film are derived from another film and the playing time of these parts exceeds 10 per cent, of the playing time of the whole film, the film shall not be registered as a quota film except on the recommendation of the Cinematograph Films Council. The proposed Regulation 4 brings the levy Regulations into exact accord with Section 20(3) of the Films Act.
Finally, Regulation 6 makes a small adjustment in relation to the definition of a television film. The definition in the existing Regulations makes a distinction between long and short films, the effect of which is that short films, unlike long films, are ineligible for levy payments if they are shown on television outside the United Kingdom within twelve months of registration. The amending Regulations will put short films on the same basis as long films. They will no longer foreit entitlement to levy payments if they are shown on television outside the United Kingdom.
All of these matters, both major and minor, have been considered by the Cinematograph Films Council, which recommended the making of the amendments now before hon. Members.
I commend to the House both the Collection and the Distribution of Levy Regulations.

2.50 p.m.

Mr. Peter Blaker: As the hon. Lady has said, these Regulations make a number of changes, some major, some minor. The hon. Lady referred to the new provisions in the Collection of Levy Regulations which exempt cinemas with relatively small takings by allowing them to average their takings over a period. She said that the effect of this would be small. It would be useful if she could be more precise about what she means by "small". The word is relative. As she knows the production side of the industry is concerned about the raising of the threshold for the levy from l1d. to 1s. 6d., and it would welcome a little more reassurance from the hon. Lady.
She said that it was her estimate that this raising of the proportion of payments for admission which is not liable for levy from l1d. to 1s. 6d. would reduce the yield of the levy by between £600,000 and £700,000 a year. That is a very substantial sum, approaching 15 per cent, of the total amount of the levy. This will help the exhibiting side of the industry, which has been pressing for such a change for some time. But it is no exaggeration to say that the producing side of the industry strongly objects to it.
In general, all sides of the industry have a common interest in the success of the others. The more films produced here, the better for all, and the more cinemas which remain open and the higher attendances continue to be, the better it is, not only for exhibitors, but producers. But when we come to the question of the arrangements for collection and distribution of the levy, which are set by the Government although the levy does not include any Government money, then we find conflicts of interest between different sides of the industry. We have one here at least when we look at it in a narrow sense. This change in the levy is felt, by the producing side of the industry, to be very damaging. The hon. Lady has explained some of the arguments for making this change. She mentioned the increasing percentage of gross takings which has gone in the levy since 1960, and this is simply a continuation of a trend evident before then. We have even seen a situation in which, if the price per seat below which there is an exemption does not rise when seat prices rise, there is the bizarre result that the gross takings of the exhibitors are falling and yet the amount of levy which they are paying is rising.
The exhibitors made this clear in then-report in 1967. They argue that with this unreasonable burden it is difficult to make a profit and to maintain efficiency. They argue that they are affected by rising costs, S.E.T. and the fact that they have lost investment allowances. All these things have increased costs, while they continue paying the levy. They blame all this for the loss of so many cinemas in recent years, which is indeed very striking and alarming.
Whether the arrangements for the levy have been the only, or the main cause, of this decline in the number of cinemas is doubtful, but it would not be proper to go into that now. I hope that it is one of the questions which the Government are considering in their major review of film legislation. The exhibitors go on to argue that every cinema that goes out of business hits not only the exhibiting side of the industry but the producing side, because the latter loses a greater amount by the closing of the cinema than by an alteration in the rate of levy.
They also argue that devaluation will have helped the producing side by making it cheaper for foreign companies to make films here. These are powerful arguments. On the other side also the arguments are powerful. The hon. Lady said that she considered that the talent, technical facilities and prowess which we have were an even more important inducement to foreign film makers to come here than the levy. That is debatable, and it is not the view of the producing side of the industry. Be that as it may, there is no doubt that the levy has been a useful means of encouraging the investment of British money in the financing of films and, even more important, American money.
The hon. Lady will be aware of the remarks of the Cinematograph Films Council to this effect. It said in its report on film legislation paragraph 7.
It appears to us that the British Film Fund is an important inducement to film production. In particular, it is an incentive to United States investment, which accounts for a very substantial proportion of British film production and which benefits the country's balance of payments.

Mr. Speaker: Order. With respect we cannot debate the levy itself. What we are debating are the variations in collecting the levy, and variations in the application of the levy.

Mr. Blaker: Mr. Speaker, the point that I am trying to make is that these Regulations involve very substantial cuts in the amounts of the levy, and it was my view that the fact that the levy is an important inducement to encourage foreign film companies to come here must be relevant when one is considering the effect of a cut of this magnitude.
There are other statements to a similar effect in the report of the National Film Finance Corporation for the year ending 31st March, 1967, in even stronger terms. The producers also say that their costs are up, and that they too are affected by S.E.T. They point out that devaluation, while it may have an advantageous effect to some extent, depends very much for its effect on the particular chemistry of the film concerned. For example, if one hires a star from the United States to play in a film in this country, it will still cost the producer as much, because the star will have to be paid in dollars.
We should remember that 80 per cent, or more of the finance for British film making in this country comes from America. The National Film Finance Corporation has estimated that this year it is likely to go up to 90 per cent, The Americans do their sums very carefully, American producing organisations have made the point that the profitability of film making in this country, compared with that in others—and we have competition from other countries—is very close to the margin. Other countries are becoming more attractive and because of of the cost making the films here is becoming less attractive.
It is also pointed out by producers that British films have a greater box office appeal for audiences in this country and therefore it is in the interests of exhibitors that as many films as possible should be made here. They feel that it would be wrong and short-sighted to make a change of this magnitude at a time when we need every encouragement to help the balance of payments and to maintain the prosperity of the producing side of the industry. These also are powerful arguments.
I accept that it must be difficult for the Government to decide exactly where to draw the line. It is very much a question of degree. The object to be kept in mind is encouragement of production without damaging unnecessarily other parts of the industry. It may be that from time to time as circumstances change it is right for the Government to put their weight in the balance on one side or the other depending on the circumstances. At present, I believe there is a case for altering the arrangements for the levy somewhat in favour of

exhibitors. I believe that the production side of the industry would accept that proposition, but it disputes how far the Government ought to have gone.
This leads me to the question of the method which has been adopted. The hon. Lady did not discuss this. She has made a simple increase in the threshold figure from l1d. to 1s. 6d. She will be aware that some members of the Films Corporation have criticised the present method of imposing the levy as inequitable. She should explain why she has adopted this method. It will give relief to some cinemas which, even by the admission of the Cinematographic Exhibitors Association, do not need relief. Should she not have considered whether a different method of changing the levy could have been adopted which would give relief particularly, and perhaps more selectively, to cinemas in the middle range of profitability and attendances which need to modernise in order to retain their audiences
The major criticism which can be made of the Government in connection with these Regulations is on the question of consultation. These Orders affect very severely the producing side of the industry. Members of that side feel that they have not been adequately consulted. They have said to me that the Regulations came to them as a surprise and a shock. I hope that the hon. Lady will deal with this important question when winding up the debate. I understand that a cut of this order was proposed by the exhibitors in February, 1967 with other alterations in the levy. The producers claim that the proposal at that time met with no support from other sections of the industry and was not pursued.
Then, in May, 1967, amending Regulations in connection with the collection of the levy were introduced. They met two of the proposals made by the exhibitors, but did not make recommendations on this point. In July, 1967, the exhibitors repeated their proposal for a rise in the figure from l1d. to 1s. l0d. The proposal was again opposed by the Film Production Association. At that time the Board of Trade asked for the Associations's opinion on the matter. I believe that in the past it has been the practice of the Board of Trade to consult various associations and the unions regularly before action was taken. It is


true that the Films Council gave the film producers indirectly some warning that this matter might again be raised, because in their review of films legislation they stated, in paragraph 7:
We consider that the levy on exhibitors should not be unduly onerous and propose to consider at an early date whether the rate should be lowered.
That report was published in March of this year, and I suppose that it can be said that it might have been taken by the production side of the industry as a warning that something was in the wind. But I am informed that no approach has been made by the Board of Trade to the Film Production Association this year about this proposal. Although earlier this year the Board of Trade asked them for their views on two other matters—second feature films and newsreels—they were not asked about this proposal. I am told that when the hon. Lady met officers of the Association on 13th May this year she touched, only briefly on the size of the levy and gave no indication that further Regulations on the topic were imminent.
Moreover, what has been said by the Government in recent months about films legislation would have led a reasonable man to believe that a change of this magnitude was not in the wind. The hon. Lady told my hon. Friend the Member for Walthamstow, West (Mr. Silvester) on 29th May, in answer to a Parliamentary Question about American investment in the film industry:
…. we are examining the whole question of films legislation and it would be unfortunate to prejudge the matter."—[OFFICIAL REPORT, 29th May, 1968; Vol. 765, c. 1814.]
It is true that she was then being asked about the renewal of the mandate of the National Film Finance Corporation.

Mr. Speaker: Order. The hon. Member may not discuss all the matters which are not in the Regulations.

Mr. Blaker: I am making the point, Mr. Speaker, that on my information the Government have failed to consult an important section of the industry about the Reflations. I am saying that the Government have made statements, in answer to Questions and elsewhere, which have taken the line that they are examining the whole question of films legislation in a comprehensive way.

Mr. Speaker: Order. They may be doing so. The hon. Member may criticise them for not consulting about the variations made in these two sets of Regulations. But we are discussing only these two sets of Regulaions.

Mr. Blaker: With great respect, Mr. Speaker, perhaps I could explain that I am criticising the Government for making these Regulations.

Mr. Speaker: Order. I understand that the the hon. Member wants other Regulations and other legislation, but he cannot debate that on these Regulations.

Mr. Blaker: with respect, Mr. Speaker, I am not asking for other Regulations. I am questioning whether the Government are right to make these Regulations in advance of the comprehensive legislation which they have promised. I am not criticising their promise to bring forward comprehensive legislation, I am criticising them for singling out this topic in advance, contrary to what they publicly said they intended to do. I think that the producers have been entitled to assume, as my hon. Friends have assumed, that it was their intention not to single out this topic, which is relevant to other aspects of finance for the film industry, and to legislate on it in isolation. We cannot separate this aspect sensibly from other aspects of film finance. It its Annual Report for 1967 the Exhibitors' Association assumed that the Government would not deal with this aspect separately and in advance of other legislation, but would reserve it for their comprehensive package legislation.
The hon. Lady has said that the Films Council favoured the change that is being made, but I am sure she would agree that that does not remove the necessity to consult the trade associations and the unions, as I understand has always been the practice in the past. What consultation has taken place recently—not in July, last year, because that was a long time ago—with the trade associations and the unions? What were the views of the trade associations and unions affected?
There has been a substantial failure on the part of the Government to consult those parts of the industry which are vitally affected. They have gone back


on their remarks, which led the House to expect that they would not single out this aspect of the problem for legislation in advance. I hope that the hon. Lady will explain why they have done this. I know of nothing to suggest that it is demonstrated that the size of the levy is the key to the profitability of cinemas. Many other questions are referred to in the Report of the General Secretary of the Exhibitors' Association which bear on this matter, and what we need is an explanation why this one should be selected for legislation in advance.
The film industry is concerned about the future, and pending the legislation which the hon. Lady has promised they want to be consulted and to know that their point of view is being properly hoisted in by the Government. They will not feel confident about the future unless the Government take more trouble about consulting them on all aspects of the activities of the industry in the future.
This alteration in the levy represents a severe reduction in the amount of money available to the production side. These Orders were published only on 12th June, and do not come into effect until 14th July. I hope that the Government will use the interval to have consultations with the production side of the industry, and take the opportunity to bring their views up to date.
But the Government should go further. If, in spite of such consultations, they decide that the Orders should come into effect without change, I hope that the hon. Lady will be able to assure us that her Department will keep careful watch for any adverse effects that the Orders may have on the producing side of the industry and will take those indications into account when making their decisions about future legislation.

3.14 p.m.

Mr. Frederick Silvester: I want to make a few points about these Regulations and the consequences which will flow from them. The motive power behind them is an attempt to assist exhibitors. There is great support for that idea on this side of the House. We all have constituencies in which cinemas which were once the key power in the life of the local community are closing down. The Exhibitors' Association put forward four points originally.

One, concerning the business of the £400 threshold, another, the attendant transitional arrangements, and a third, the introduction of seasonal clauses—which are in the Regulations—have all gone through with support from both sides.
The question turns upon raising from lid. to 1s. 6d. the portion of the payment for admission which is not liable to levy. There is great sympathy for the exhibitors, but we would be wrong to give our sympathy expression for the wrong reasons. I will explain that. The exhibitors argue that their share of the gross takings of the cinemas has fallen from 63 per cent, in 1957 to 58·6 per cent, in 1966. This is not limited to exhibitors; it is a common feature of post-war retailers of all kinds that their margin has been squeezed.
Looked at in another way, taking the average income per extant cinema, recognising that a number have fallen by the wayside, the average earnings have risen from about £10,000 per cinema in 1957 to nearly £19,000 per cinema in 1966. That highlights the difference between the attitudes of the exhibitor and the producer. The exhibitor is concerned with the profitability of a specific cinema, which might be made profitable by closing it down for site value or for some other reason. The producer is concerned with the overall income of the cinema industry. To put it in another way, the share which an exhibitor has of the income of a cinema or group of cinemas can fall, yet his income can rise, but if the total income of the cinema industry falls and the producer's share remains static, his actual income can fall.
Thus the comparison is not a fair argument. What matters is the absolute level of the levy and the income available to the producers. I have calculated on the figures available that between 1957 and 1966 the average earnings per extant cinema have risen by about 90 per cent,, from £10,000 to £19,000. Comparing the total amount of film hire with the total number of British and foreign films registered, the amount of film hire paid to the producers has risen by something like 10 per cent, This gives an understanding of the pressures behind the producers' complaint on these Regulations.
I have spoken of the absolute level being important. In the Annual Report


of the C.E.A., Rank and A.B.C. both say that, although they do not dissent from The Order, they strongly feel that the total subsidy ought to be maintained at approximately the present figure. We are now in the position where the producers say that something must be done for the exhibitors, but they also agree that the absolute level of the levy must be maintained as closely as possible to the present figure.
The Regulations make an arrangement whereby, irrespective of the profitability of the cinema, it will automatically gain and, as I understand it, it is possible for some of the most profitable cinemas to gain the most. This has to be put in the present psychological atmosphere in which the cinema industry is undergoing a great change while the review is going on. I will not go out of order, Mr. Deputy Speaker. They do not know what is ahead for the N.F.F.C. They are worried about the restrictions which President Johnson is imposing and about S.E.T. The hon. Lady is taking off some 15 per cent, of the levy to which they have been accustomed, and she should understand the pressures behind the objections.
It is difficult for a back bencher to make the calculations, but doubtless the hon. Lady's Department can provide them. My estimate is that approximately one-quarter of the cinemas paying about one-third of the levy are in difficult straits in regard to profitability and income. Therefore, we are concerned not with the blanket levy that she is putting before the House, but with a change in the format of the levy which would make it easier for these cinemas to invest in improving themselves. The question therefore is muoh bigger than is posed by the levy.
It is a great pity that the hon. Lady decided to introduce a reform of this magnitude at this time. Certain modifications are necessary, but, as I understand it, her major proposals, covering much bigger matters like siting, investment and barring agreements, are due out in the next year or so—and I hope that it will be in the next year—for us to discuss. The levy forms an important part. To make a 15 per cent, change at this stage of the game is very unwise, particularly since the producers believe that they have not been consulted properly.
I hope that the hon. Lady will consider again whether it is possible to rejig the Regulations in such a way that the main assistance goes to the middle band of cinemas and less of it is lost to the most profitable.

3.20 p.m.

Sir Lionel Heald: I realise that other important business is to be done, but this is a very important matter and I regret to say that it appears that the hon. Lady the Parliamentary Secretary is not taking it very seriously.
I feel a deep sense of responsibility, because some time ago I was requested to assist British Lion Films, which, after all, is the biggest British independent production company, with a view, in particular, to ensuring that British films did not go out of existence and that the company was prevented from being induced or compelled to leave the British production field. I feel that it is my duty, on the information which I have received in that capacity, to point out that there has not been consultation in this matter as there should have been. My view is that this Order should be postponed until there has been consultation. We do not know what the hurry about it is, except to get it through before people realise what it is all about.
I am told that the Parliamentary Secretary met officers of the Film Production Association on 30th May and gave no indication that this Order was coining. As a result, the Director of the Association arranged with the President of the Cinematograph Exhibitors Association on 11th June to meet to see whether they could arrive at some arrangement. The answer of the Ministry was to produce this Order the next day. It seems to me rather remarkable. Why is it not possible to allow the discussions to continue and to postpone introducing the Order? I challenge the hon. Lady to say why it is necessary for this to be done in such a hurry, unless it is that no consultation is wanted.
I shall not take up time by dealing with the importance of the matter; I think that that is realised. However, the hon. Lady has said that it was considered that it was time to put forward some relief. She was well aware that what was proposed would be unwelcome to the producers, and it is difficult to draw the


line. In such circumstances, what could be more plain than that there should be consultation? I do not think that the hon. Lady and the Department are giving that attention to British film production which they should give.

3.25 p.m.

Mrs. Gwyneth Dunwoody: Hon. Members opposite have waxed extremely eloquent on a brief obviously provided to them by some of the interested parties. I strongly resent the implication that I am not taking this matter seriously. I do not accept that there has not been consultation with all sections of the industry. I myself have seen the Film Producers Association, the C.E.A. and the unions, and they have been fully consulted also through the Cinematograph Films Council.
This change has been under discussion and the subject of consultation for more than a year. It is not true that the Film Producers Association was given the impression that the whole thing had been dropped. In fact, the Association was asked for its representations. It has twice expressed itself to be in total opposition. I quite understand that it is concerned about anything which will alter the size of the levy. Nevertheless, I must emphasise that its allegation about lack of consultation is one which the Association has dragged in recently. It is not true that the Association has not been asked for its opinions.
I have had occasion recently to look at the minutes of the meeting that I had with representatives of the F.P.A., because they obviously went away with a totally erroneous impression. Hon. Members have expressed concern about the whole question of films legislation, which is under review. The reason why we have given the non-committal replies referred to by the hon. Member for Blackpool, South (Mr. Blaker) is that this whole legislation is of such importance and of such scope that it is still under review.
It was represented to us more than once over the past year by the exhibitors themselves—I am now talking of the whole of the Cinematograph Exhibitors Association and not of the large circuits; I am talking about the independents, which are in considerable straits; the figures prove this—that this is a question of great

urgency and not a question of hanging on for yet another year until they get the final legislation. We must try to keep these things in some sense of proportion.
I have said that it is difficult for me to give any exact estimate of the reduction in levy yield because of the way that so many imponderables enter into this and because of the way that the levy is calculated. I should be very foolish indeed if I were to give any figure today. We have gone into this very carefully and we are convinced that it will be, compared with £4·6 million, which was the size of the levy, a small reduction. If I were to make a personal estimate, I would say that we will still be talking in terms of the levy running to at least £4 million in future years. I have already said that, if it reaches £5 million, we shall be under statutory obligation to do something about reducing it. It is not quite as simple as the film producers would have us believe. This method gives much greater relief to lower price cinemas than it does to expensive places. This is one reason why it is considered to be exactly the right way of doing things.
I realise that those members of the Film Producers Association who are concerned about the situation that exists in the industry are likely to look at any change with a leery eye. This is not under discussion. It is because we are concerned with all sections of the industry that we had to consider whether we should do something to assist those exhibitors who might go out of business before the end of another financial year, because the number of cinemas In Britain has been halved since 1960.
The hon. Member for Walthamstow, West (Mr. Silvester) said that, because of the site values, if exhibitors sold their cinemas they would still retain their income. This is one point of view. If a man sells his means of earning a livelihood, although he would retain assets I do not think that he would regard this as being the ideal solution to his problems. The exhibitors themselves consider that they should be given a chance to continue in the business, and I am now speaking very much of the independent exhibitors, the people about whom we are concerned.
Briefly, as I know that hon. Members wish to get on with other business. I


must return to the question of consultation with all sections of the industry. The Cinematograph Films Council is established so that, when full consultation takes palace, all interests may express a view. There has been an enormous amount of discussion within the Council about the size of the alteration. I have already stressed that we have not given the exhibitors all they asked for.
The film producers are just not right when they say that this alteration has gone through without their being fully consulted. Because I was so concerned about the erroneous ideas which they seemed to take away on certain other matters of films legislation, I have recently looked at the record of the meeting which we held. I say firmly that, although I understand their fears, I believe them to be misplaced on this occasion.
This country has a fund of imagination and talent which will attract film makers here for many years to come. The levy is only one of the factors. Let us not talk as though we are doing away with the entire amount. There will still be a considerable sum available to film producers. Having looked at the whole situation, not just at one sectional interest, we feel that we must alter the levy and alter the exemption level. We are saying to the industry, "We believe that you have a very good future indeed. Nevertheless, we must seek to help not Just those of you who are making films but those who are showing them". This is the point. If there is nowhere for people to show their films in Great Britain, we shall be furthering the interests of neither the producers nor the people actively employed in the industry.
This is not an arbitrary move. It comes after over a year of discussion, and it comes with knowledge that, although we cannot hope to please all sections of the industry, what we propose is one of the best ways we can find to help the section of the industry which has had a considerable decline in its interest over past years, a decline which still actively continues.
On balance, therefore, we felt that it was right to do something now, in advance of the legislation, because of the urgency which the exhibitors stressed when they visited the Board of Trade. I utterly refute the suggestion that we have


not had consultation, and I ask the House to approve the Order.

Question put and agreed to.

Resolved,

That the Cinematograph Films (Collection of Levy) Regulations 1968, a draft of which was laid before this House on 12th June, be approved.

Cinematograph Films (Distribution of Levy) (Amendment No. 3) Regulations 1968 [draft laid before the House, 12th June], approved.—[Mrs. Gwyneth Dun-woody]

Orders of the Day — MAINTENANCE ORDERS BILL

Lords Amendments considered.

Clause 1

INCREASE OF MAXIMUM PAYMENTS FOR CHILDREN

Lords Amendment: No. 1, in page 1, line 5, leave out subsections (1) and (2) and insert:
( ) The enactments described in Schedule (Enactments Amended) to this Act shall have effect subject to the amendments specified in the second column of that Schedule, being amendments removing the limits of fifty shillings and seven pounds ten shillings imposed by those enactments upon the weekly rate of the payments for the maintenance of a child, and for the maintenance of a party to a marriage, which may be required by order of a magistrates' court thereunder.

3.34 p.m.

Mr. Qnintin Hogg: I beg to move, That this House doth agree with the Lords in the said Amendment.

Mr. Deputy Speaker (Sir Eric Fletcher): I suggest that it will be convenient to take at the same time the following five Lords Amendments:

No. 3, in Clause 2, page 2, line 10, leave out Clause 2.

No. 4, in Clause 3, page 2, line 23, leave out subsections (1) and (2).

No. 5, in page 2, line 31, leave out from "Act" to "may" in line 32.

No. 6, in Clause 4, page 2, line 40, at end insert:
(4) Section 15 of the Matrimonial Proceedings (Magistrates' Courts) Act 1960 is hereby repealed.

No. 7, in page 2, line 40, at end insert new Schedule—


"SCHEDULE


Enactments Amended


The Guardianship of Infants Act 1925.
In section 7, in subsection (1), paragraph (c) of the proviso shall be omitted.


(15 &amp; 16 Geo. 5.c.45.)



The Affiliation Proceedings Act 1957. (5 &amp; 6 Eliz. 2. c. 55.)
In section 4, in paragraph (a) of subsection (2), the words ' not exceeding fifty shillings a week'shall be omitted.


The Maintenance Orders Act 1958. (6 &amp; 7 Eliz. 2. c. 39.)
In section 4, in subsection (3), for the words from' whichever ' to the end there shall be substituted the words ' the rate of payments specified by the order as made or last varied by the original court'.


The Matrimonial Proceedings (Magistrates' Courts) Act 1960. (8 &amp; 9 Eliz. 2. c. 48.)
In section 2, in paragraphs (b) and (c) of subsection (l), the words 'not exceeding seven pounds ten shillings' shall be omitted; and in paragraph (h) of that subsection for the words from 'payments by way of a weekly sum ' to ' fifty shillings ' there shall be substituted the words ' weekly payments.


The Matrimonial Causes Act 1965. (1965 c. 72.)
In section 24, in paragraph (a) of subsection (2), the words " at a rate not exceeding seven pounds ten shillings a week ' and the words ' at a rate not exceeding fifty shillings a week in respect of each such child' shall be omitted; and in paragraph (b) of that subsection for the words from ' at rates ' to ' rate aforesaid ' there shall be substituted the words ' an order increasing'."

We can leave Amendment No. 2, in page 2, line 5, to leave out subsection (3), to be dealt with separately.

Mr. Hogg: Certainly, Mr. Deputy Speaker.
Although these Amendments appear to effect a radical alternation in the Bill, they make only two changes of substance. When we passed the Bill I disclosed that I introduced it very largely because I was aware of the pendency of the Graham Hall Report and in order that early effect should be given to it.
Between Second Reading and now the Report appeared. It declared in favour of the removal of all limits in the maintenance orders affected by the Bill, which was designed to cover exactly the same grounds as the Report. On consideration, although my opinion might have been different unaided, I accepted the Report in its entirety, and their Lordships passed a series of Amendment designed to give effect to it. These are technical Amendments.
The only other matter dealt with is something that, although technically a matter of privilege, is, I believe, a matter commonly waived by the House—

Mr. Deputy Speaker: Order. I believe that it will be for the convenience of the House if we deal with that separately.

Mr. Hogg: Yes, Mr. Deputy Speaker.
The Amendments either give effect to the Graham Hall Report or deal with a provision which has been overtaken by the Finance Bill.

3.36 p.m.

The Under-Secretary of State for the Home Department (Mr. Elystan Morgan): The Government support the Amendments. As the House will appreciate, they were moved by the Government in another place.
When the right hon. and learned Member for St. Marylebone (Mr. Hogg) introduced the Bill he was generous enough to include a long Title sufficiently wide to allow a change of the nature that has taken place. At that time the Graham Hall Committee had not reported, but it was assumed that changes of this nature would be made. The assumptions that no limits for these maintenance orders would be recommended proved correct.
I should like to summarise the heart of the Committee's most valuable Report. It found that for the majority of cases the effective limiting factor is not the limits now set by magistrates' courts but the means of the parties, but that in a significant minority of cases the means of the parties would have allowed the court to make a larger order but for the statutory limits. In other words, the evidence indicated that the present limits are irrelevant to the majority of cases and obstructive to a minority.
The Committee looked for means of establishing new higher limits that would be free from the disadvantages of the present limits. A limit of £10 a week was discussed, but ultimately the Committee came down in favour of abolishing limits altogether. It was impressed by the unsolicited arguments in favour of abolition from such bodies as the Association of Children's Officers, the Justices' Clerks' Society, the Magistrates' Association, the National Association of Justices' Clerks' Assistants, the National Association of Probation Officers and the National Council for the Unmarried Mother and her Child. Accordingly, it recommended the abolition of the limits that apply in matrimonial, guardianship and affiliation proceedings.
I should like to add my own congratulations to the right hon. and learned Gentleman, since I was not at the Home Office when the Bill was introduced. In the few years I have had the privilege of being a Member of the House, like everyone else I have appreciated the wide range of qualities he possesses. It is not always that hon. Members on this side of the House appreciate this in the heat of controversy, but amongst the very many admirable qualities the right hon. and learned Gentleman has there are compassion and deep humanity.

Mr. David Weitzman: I take the opportunity to say how very much I welcome the changes. I, too, pay special tribute to the right hon. and learned Member for St. Marylebone (Mr. Hogg); he has provided the opportunity for this change to be made much sooner than it might have been had we waited for legislation to be brought about as a result of the Graham Hall Report.

Dame Joan Vickers: I also congratulate my right hon. and learned Friend the Member for St. Marylebone (Mr. Hogg). I was one of the sponsors of his Bill. I also thank the Under-Secretary for what he has said. I also want to place on record our deep gratitude to Miss Graham Hall for her Report. It was an admirable one and well thought out. Great pains were taken, and she hurried it up when my right hon. and learned Friend was fortunate enough to get his Bill in the Ballot. I would express our gratitude to Miss Graham Hall and to her Com-

mittee for the deep thought given to the matter.

Question put and agreed to.

Lords Amendment: No. 2, in page 2, line 5, leave out subsection (3).

Mr. Hogg: I beg to move, That the House doth agree with the Lords in the said Amendment.
Perhaps I may be allowed to thank the Under-Secretary whom I wish well in his appointment, the hon. and learned Member for Stoke Newington and Hackney, North (Mr. Weitzman), and my hon. Friend the Member for Plymouth, Devon-port (Dame Joan Vickers) for their kind words.
There is technically, privilege involved in this, but I think it is one of the privileges that we should be wise to waive and, commonly waive.
The position is that under the Income Tax law only small payments ordinarily escape the net of deduction at source, and until recently they did. We put in in this House certain Amendments to my original draft designed to cover the position, but they have now been overtaken by the Finance Bill. Therefore, there is no need for them, and the Lords have removed them on the suggestion of the Government.

Mr. Elystan Morgan: The Government support the Amendment. This, again, was introduced by the Government in another place. It has the effect of carrying out by an Amendment to Clause 17 of the Finance Bill recommendations contained in paragraphs 162, 163 and 164 of the Report.

Question put and agreed to.

Remaining Lords Amendments agreed to. [One with special entry.]

INTERNATIONAL ORGANISATIONS BILL [Lords]

Order for Second Reading read.

Motion made, and Question put forth with, pursuant to Standing Order No. 60A (Second Reading Committees), That the Bill be now read a Second time.

Question agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee, pursuant to Standing Order No. 40 (Committal of Bills).

Orders of the Day — INTERNATIONAL ORGANISATIONS [MONEY]

Queen's Recommendation have been signified—

Resolved,
That, for the purposes of any Act of the present Session to make new provision (in substitution for the International Organisations (Immunities and Privileges) Act 1950 and the European Coal and Steel Community Act 1955) as to privileges, immunities and facilities to be accorded in respect of certain international organisations and in respect of persons connected with such organisations and other persons, it is expedient to authorise the payment out of moneys provided by Parliament of any amount refunded in respect of customs duty or purchase tax in accordance with arrangements made under the said Act of the present Session.—[Mr, William Rodgers.]

Orders of the Day — WAYS AND MEANS INTERNATIONAL ORGANISATIONS

Resolved,
That it is expedient to authorise such incidental charges to estate duty as may arise from granting any exemption from duty provided for by any Act of the present Session to make new provision (in substitution for the International Organisations (Immunities and Privileges) Act 1950 and the European Coal and Steel Community Act 1955) as to privileges, immunities and facilities to be accorded in respect of certain international organisations and in respect of persons connected with such organisations and other persons.—[Mr. William Rodgers.]

Orders of the Day — MINISTRY OF SOCIAL SECURITY SITE, LONGBENTON

Motion made, and Question proposed. That this House do now adjourn.—[Mr. Fitch.]

3.45 p.m.

Mr. Geoffrey Rhodes: (Newcastle-upon-Tyne, East): The issue I bring before the House raises a number of deep points of principle. The rights of individual citizens, the physical condition of their environment, their peace of mind—these are matters I do not take lightly but, as I hope to show, they are rights that can very easily be trampled on by an insensitive bureaucracy.
On the northerly fringe of my constituency there are very many pleasant

houses on a site which up to 20 years ago had an open aspect in a semi-rural atmosphere. When local residents acquired these properties, the land, in the main, formed part of what was known as Lord Armstrong's Estate. It was expressly stated in the deeds that the buyers of the land were not to carry on any business or industrial activity. In other words, this was an open, private, pleasant, secluded residential area.
Such is the case no longer, for on this vast and extensive site, in front of the many houses to which I have referred, there exists today what is, I think, the largest clerical campus in the whole world and one of the world's largest public administration departments. It is the headquarters of the massive Ministry of Social Security, with upwards of 10,000 employees and with many more to come.
I am all in favour of the devolution of Government Departments from London, and the region in question has greatly benefited from the large number of job opportunities that have been provided. But whenever there is development of this kind there is always another side to the coin, and the House could, I think, usefully pause for a moment to look at some of the conditions which my constituents have had to tolerate in the last few years. I will give some examples from the constant stream of complaints I have received.
First of all—and a large number of the Ministry's employees have vehicles —there has been a vast increase in the amount of vehicular traffic, and the access roads to the Ministry building are inadequate, particularly at peak periods. Masses of cars clog up the side streets running round the site, and I know—because I know the people involved—that residents find that they cannot get their cars in or, if they are in, cannot get them out. Some of the people say that they often feel like prisoners in their own homes.
The Ministry of Social Security has a practice in its building plans and procedures of pushing all its less aesthetic, less pleasant buildings to the back of its site. The back of the site is, of course, the front of my constituents' houses. Or the Ministry puts these buildings to the south of its site, which also fronts my constituents' houses.
It is there that the Ministry planned a collecting centre for waste paper, so that a fair amount of that waste paper lands in my constituents' gardens. Then we get the mushrooming in front of these houses of such things as a boiler house, an engineering and maintenance workshop, an employees' toilet, a car park, and even a 120-foot chimney. This last object has not yet been built, because the first thing I did on entering the House in 1964 was to persuade my right hon. Friend the Member for Leeds, West (Mr. C. Pannell), who was at that time the Minister of Public Building and Works, to move the chimney. He said that it would have to be built, eventually, but not on such an obstrusive site and I am grateful for his co-operation, although I can readily see that it is very difficult to hide a 120-foot chimney.
In any case, there is still left the problem of the very noisy boiler house with its belching smoke working often very late during the night and not yet at full capacity and therefore not at its full blast and full pitch of noise. Incidentally, that was a piece of planning about which local residents were never consulted.
That is not the end of the story. There is a human element. It is a small thing, but in the long run it may lead to a great deal. Young employees play noisy ball games on some waste ground in front of these houses, which happen to contain a number of people who work night shifts and who complain of the frequency with which balls are kicked into gardens and, worse than that, the abusive language which they receive when they complain. There is also the constant noise of the refuse collecting centre. Much land has been ashphalted, and this has led to impeded drainage of the site with regular flooding of the gardens of some of my constituents. There is machinery which sometimes works throughout the night; there are sewers which have been blocked. All these are developments of a character never intended for this site.
Then there are Ministry employees returning from nearby public houses who have indulged in unseemly and abusive behaviour, late night revellers after dances and parties held at the Ministry who have caused disturbances, including flinging bottles and cans into adjacent gardens and urinating against local resi-


dents' gates and walls. I only recently received a complaint of residents finding such objects as ladies' underwear and discarded contraceptives in their gardens.
I am fully aware that we cannot expect perfect behaviour from anybody and I am fully aware that in a vast campus of thousands of employees, including many young people, there will be people who misbehave, but it is also understandable that in this situation my constituents should react strongly against any further encroachment on their peace of mind.
As my file has been full for many years with complaints from local residents, which were passed on to the local officials responsible for the site, who have been unable to deal with most of them, it is not surprising that a month ago some of the local residents decided that enough is enough, and they took a firm stand on a simple and straightforward issue. They noticed that foundations were being laid immediately in front of their houses for what they found on inquiry to be an engineering and maintenance workshop. The people in Corchester Walk and Ainthorpe Gardens were fortunate to have among them a Mr. Alfred Hobson who has made a study of the administrative law. He knew, and when he consulted me had it confirmed, that, under Circular 100/50, the Ministry of Public Building and Works building this workshop for the Ministry of Social Security should have consulted the local planning authority. He found out that the local planning authority had not seen the plans for this development and had not been consulted.
Meanwhile, I had taken up this matter with my right hon. Friend the Member for Bermondsey (Mr. Mellish), the Minister, and he had written to me to say that the building must proceed and that the local planning authority had approved the plans. But a short while later one of his staff telephoned me in Newcastle to say that that was not correct. I must make it clear before going any further than that the Minister apologised profusely for this error, and I unreservedly accepted his apology in good faith. It may surprise him to know that he is one of my favourite Ministers.
I was also delighted, and not surprised, knowing my right hon. Friend, that he not only drew attention to the error, and apologised, but he stopped


the building in progress. He wrote to say that the local residents would be fully consulted about the plans for this part of the site. What appalled me, and upset the local residents very considerably afterwards, was that within hours someone in his Department for which he was responsible had invoked the rarely used procedure—I think it has been used only once during my right hon. Friend's occupation of the Ministry— known as the special urgency 14-day procedure, for consultation with the local planning authorities. This meant that it was impossible for my constituents to see the plans at all before they had to attend the meeting with the local planning authority, at which they were supposed to put their case against the plans.
The plans arrived during the weekend, the residents were told about the meeting on the Wednesday. They asked to see the plans, but could not see them until the meeting took place. They were therefore unable to take professional advice, and it was a travesty of proper consultation. It was not surprising that this development was described as a bureaucratic bulldozer, treating people like dirt.
My right hon. Friend said at Question Time on Monday, quite rightly, that it was not his responsibility to consult local residents. He went on to suggest that my criticisms were based on personal ignorance of the law. We can make what suggestions we like about the qualifications of hon. Members. I would only say that for many years I had the honour of serving on one of the largest planning authorities in the country. I know planning law well enough. Circular 100 is absolutely clear. The demand for the special urgency procedure could be made only by the Department. The Circular continues quite specifically by saying:
… Departments have agreed to use the special urgency procedure in as few cases as possible as it is appreciated that it is often difficult for local authorities to make their comments within a period as short as 14 days.
Not only had the local authority's comments to be made within 14 days but in this case, because of the circumstances, we had to get the comments of the local residents, which the local authority then had to submit to the Minister, within 14 days. It was politically insensitive for


the Minister, having apologised for one mistake, to proceed to invoke a procedure which made it impossible to have proper consultation with the local residents. The responsibility lay with the local authority, but the circumstances in which it had to report within 14 days made it impossible for my constituents to take professional advice before the meeting. This cancelled out the enormous amount of goodwill created by the Minister's intervention.
It is not surprising that my constituents complained strongly at the beginning of the meeting, at which there were representatives from the Department and which was supervised by the planning authority, about the procedure adopted, saying that they had not yet seen the plans. The Conservatives in charge of the Newcastle planning authority can lie as much as they like, but the Press was present at the meeting, and it knows perfectly well that the local residents protested strongly at the outset about the circumstances in which the meeting was held.
I have had further correspondence since the meeting, confirming that, from the representatives of the residents. I am aware that eventually, during the meeting, it was agreed that the workshop should be shifted. I am not surprised, because there had been adverse publicity against this development throughout the North of England on television and in the local and national Press. The residents had dug their feet in and this had become a Parliamentary issue. There is no one living in that part of Newcastle who does not believe that, had it not been for the toughness and vigilance of the local residents, and their Member, that workshop would not have been shifted.

It being Four o'clock, the Motion for the Adjournment of the House lapsed without Question put.

Motion made, and Question proposed, That this House do now adjourn—[Mr. Fitch.]

Mr. Rhodes: That workshop would not have been shifted but would have been on the site today. We have not come to the end of this story because the Ministry is still trying to persuade the local residents—and whatever the city council may say they are not happy about this—to have a car park in front of their


houses, as if there were not enough traffic congestion at that corner of the site already.
In the course of these discussions a number of interesting facts have emerged. I shall quote a letter from the leader of local residents, Mr. Hobson, written immediately after the meeting at which the leader of the city council said that the residents were delighted and pleased. This is from people who are "fully satisfied":
During the meeting with the planning authority it was clear that there was insufficient awareness on the part of the Ministry officials that the sheer size of this site (going up to 12½ thousand employees) demanded special research and attention. Ministry officers have very little information about such items as future traffic loads and flows, the social nature of the area, for example, in the number of elderly people, the number of schools, the flow of students; student hostels, the new hospital and restrictive covenants. Ministry officials were not paying sufficient attention to the best principles of town and country planning.
This is a Ministry of Social Security site. The Ministry is concerned with public welfare and this should be a show piece, a model of good planning with lawns and trees and no overcrowding. Around the whole perimeter of the site, because it backs on to all these residents' houses, it should be properly landscaped with trees and should look attractive from the back as well as from the front.
During the discussion we found that the developments which have taken place, for example, the massive block of construction alongside Hiddleston Avenue had been approved by the planning authority, but none of the people on that street had been consulted. Here was a fault on the part of the local planning authority. The local planning authority would also have been well advised to have taken a stronger line against the 14-day emergency procedure. Instead of meekly conniving at it, it should have protested against it as the residents and I did.
A permanent consultative committee is needed to consider future developments which would consist of representatives of the local residents, the city planning authority, the Ministry, councillors and the local Member of Parliament. The Press should attend its meetings. The leader of the city council has told me that privately he supports such a scheme.


We have heard of the present disillusionment with politics and politicians. We have heard of remoteness of Government and distrust of bureaucracy. Sometimes these criticisms are exaggerated but we need to bring people far more into the actual processes of planning. In the case I have quoted, knowing and living so near to it—only a few hundred yards away but, thank goodness, not on the actual site,—there is an example of what is wrong with British politics and perhaps a hint or two of how at least in part they should be put right in future.

4.5 p.m.

The Minister of Public Building and Works (Mr. Robert Mellish): I have been a Member of the House for 22 years, and I claim to know something of its procedures and something of its values. I deny to no man my affection for the House and all that it means. I know that anyone who is elected to the House is elected by his constituents, who have a prior claim on his feelings and views. But I have learned one thing above all in those 22 years: if an hon. Member wants to do something for his constituents, the best way to approach it is to do that which is right and that which is proper in order to get for his constituents that which they ought to have, rather than to make sure that he gets a lot of publicity for himself.
I have been Minister for 10 months, and I claim to have been a very ordinary Minister, with no special attributes of glory or fame. Since I have been a Minister, however, I have let it be known to every hon. Member that I was approachable on any matter affecting my Department at any time. I have let it be known that any hon. Member who wished to see me had only to pick up the telephone and ask. Indeed, I have instructed my private office to see that the door is open for hon. Members who wish to see me about anything which concerns my Department.
My first complaint—because my hon. Friend the Member for Newcastle-upon-Tyne, East (Mr. Rhodes) seemed to be complaining throughout his speech—is that until I received his letter I had no knowledge of this matter. He has been telling the House a great story about the Ministry of Social Security's building and all the problems associated with it. But at no time during the past 10 months



has he picked up a telephone and endeavoured to come to see me about it, to discuss the present and the future. There is, of course, not much that I could have done about the past.
Having been a Member for 22 years, I find it very sad indeed that this should happen when a great Department such as my own, which is an honourable Department, makes a genuine mistake. I concede straight away that we made a mistake in this case. My people at local level were under the impression, quite honestly and sincerely, in building this workshop on this site that headquarters had received local planning approval. In fact, they had not. They started to build the workshop on this site. The moment my attention was called to the situation, I immediately ordered the building to stop, forthwith. I then used what my hon. Friend describes as the 14-days' procedure—that is, to have consultation with the local authority under what is called the Circular 100 procedure. I will come later to the reasons, in more depth.
After all, we were not building a gambling casino or a bingo hall. We were building an annexe to the Ministry of Social Security building—a building of some importance. I did not think that anybody believed that there had been any malicious intention on the part of my Department. They started to build this workshop from sheer ignorance of the situation, and the moment I heard about it, I stopped it.
We used the 14-days' procedure and, as a consequence, the local authority then consulted the local residents. I have correspondence to show—certainly these letters to the local authority show—that the local residents had no objection to the fact that this workshop was to be re-sited. I apologised to my hon. Friend by letter for what had happened. He asked Questions on the Floor of the House, and I apologised again. But apparently we still have to have an Adjournment debate, and I suppose that I am expected to apologise again. I do not know how many more times I am supposed to do it.
Before I ever heard of the story, my hon. Friend had been on television and there were stories in the Press about it. No doubt he must be the local hero. He must be the local Sir Galahad of


these people, who remedies all these complaints on behalf of his constituents, putting the rest of us in rather a bad light. But I am one Minister who is not prepared to take that sort of criticism. I will simply spell out the story as I know it and as I am advised.
I will come, first, to the local residents, of whom my hon. Friend spoke. I am told that very many of them have moved into their houses since this Ministry of Social Security site was established. They knew the circumstances when they went there. It is not a case that those people living in the area suddenly had this great conurbation of buildings placed in their midst.
What building is it? It is a Department employing 10,000 people. The first Labour Government of 1945–50 took a very far-sighted decision. They decided to transfer the Ministry of Pensions and National Insurance, as it was then, to Newcastle. They did it and they were wise, and we have followed through the policy of transferring people to Newcastle out of London. I thought that that was the desire of the House. We have found employment for over 10,000 people in the area. I am now told that these people behave like animals, in the crudest way.
I do not necessarily accept from my hon. Friend this criticism. The behaviour of the staff of the Ministry of Social Security is not my responsibility. It is the responsibility of my right hon. Friend. I am advised that the senior officer in charge at the office has been prepared to meet people and discuss their problems, but it is inevitable in an area where 10,000 people are working that there should be individual complaints.
I come from dockland, and I could make many complaints about what it is and what it is not, but this is part of our life and our industry and the unpleasantness that a great deal of dockland produces for me I take for granted, because I know the other side of the coin, which is that this industry produces work for my people and trade for Britain.
My hon. Friend has made statements that the Press would like to print in thick black letters. I can imagine the banner headlines reading "Ministry of Social Security at Newcastle-on-Tyne


full of Contraceptives in the Yard". One can almost see the headlines. I suppose that that is why my hon. Friend said what he did. I must tell him that the way in which he has handled this case is resented by me, because there was another way of dealing with it. He could have seen me at any time.

Mr. Rhodes: The complaints of my constituents have been conveyed to the controller at the Ministry of Social Security site. I have hinted that they have. The reason that I did not telephone further was that I realised that my right hon. Friend could not answer for the Ministry of Social Security. I do not need my right hon. Friend's help in advising me how to handle my constituents' affairs. They may take a different view of the matter from that which he does.

Mr. Mellish: I am not concerned with what my hon. Friend thinks about me; I never have been. I am telling him what I think about him. I am taking this opportunity of an Adjournment debate to do so. That is the difference between my hon. Friend and myself. I claim the right to speak in defence of my Department, and my hon. Friend's insinuation, that something has been going on during the last 10 months for which I accept responsibility. I am saying that my hon. Friend could have picked up the telephone and called me within an hour. I ask him the simple question: why did not he do it?

Mr. Rhodes: I can answer that question. For the last 10 months, during which time my right hon. Friend has been responsible for this Department, I have received only one complaint about his Department. That is the matter in respect of which I did not pick up the telephone but I wrote to my right hon. Friend. The other complaints were dealt with and referred to his Department before he took over.

Mr. Mellish: I say that my hon. Friend gave television publicity and newspaper publicity to this matter before I had anything to do with this complaint, and I again claim that if he had wanted to settle this matter promptly and efficiently and he was concerned to get his news in the Press he could have used the telephone and taken immediate steps to clear it up.
My hon. Friend referred to the attitude of the local people. I have a letter dated 10th June, 1968, signed by a Mr. Galley, the City Planning Officer for the City and County of Newcastle-upon-Tyne. He says, addressing his letter to one of my senior people at the Ministry:
Dear Sir, with reference to your letter and enclosed plan dated 30th May, I would inform you that the revised siting of the maintenance depot was considered by the Development Control Work Group at a special meeting held on 31st May and it was resolved that subject to the formal views of the residents being obtained they had no objections to the revised siting. The residents have since expressed the view that they have no objections to the revised siting. I also enclose for your files a copy of the minutes of the meeting held on 29th May, 1968.
I have read this letter because it is a consequence of the action that I took within what is called the 14 days' procedure. The local planning authority which should have been consulted earlier and was not—I apologise for that—called the meeting as a matter of urgency at which they discussed the problems with local people. My hon. Friend conveyed the impression that these people were ignorant of plans. The truth is, as he knows well, that these people know exactly what is going on on the site, they live around it and they do not need plans; they can see it for themselves. They knew where the building would be started and, in discussing the matter, they needed only common sense. They obviously have some of that because, when the meeting was held and the re-siting was suggested, there were no difficulties and agreement has already been reached.
The other point I want to deal with is the matter of parking. I am advised that parking space will be provided here for 1,400 cars. We are also trying to get another site to ensure that those who work here—and remember, 10,000 people are working here—are given parking space. We are doing the best we can to ensure that these people will not be a nuisance with their cars to those who live in the immediate vicinity. I tell my hon. Friend that it is not only in Newcastle that there is a problem, it is the problem of cars. Everyone who lives in London knows that there is hardly a street in London which is not lined by other people's cars. It is the motorists who are menaces to all of us, and we are menaces ourselves because


we are all motorists. To make the matter that much more serious in Newcastle and to think of it as a brand new problem is something which I am not prepared to accept.
The building about which my hon. Friend has made so much is a very small one. It will cost a little over £20,000. It is a workshop and depot, and the site is needed for a later stage of redevelopment by the Ministry of Social Security.
The way in which the hon. Member has stated this case certainly does not

bring out the best in me, as he can see from what he has heard today. It is a matter that could have been dealt with in the way I have suggested. At the end of it he has achieved the solution which he desires; I am sure that is right, he gets all the things he wants. He gets not only the satisfaction which he has a right to expect as the representative of his constituents, he also gets the full blast of publicity.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past Four o'clock.